SISAL DEVELOPMENT FARM AND JUTE BAG(SACK) MANUFACTURING

INDUSTRY ESTABLISHEMENT PROJECT

INVESTMENT FEASIBLITY STUDAY: March/2018

OWNER- YESIGET MANUFACTURING SISAL DEVELOPMENT FARM AND

JUTE BAG PROCESSING,
0 PLC
CONTENTS
ACRONYMS .......................................................................................................................................................... 5
1. SUMMARY OF THE PROJECT ................................................................................................................. 6
1.1 PURPOSE OF THE JROJECT REPORT ........................................................................................ 6
1.2 DESCRIPTION OF THE INVESTMENT BUSINESS ................................................................... 6
1.3 RATIONAL BEHIND THE PROJECT .............................................................................................. 7
1.4 INVESTMENT CAPITAL ...................................................................................................................... 7
1.5 LAND AND CONSTRUCTIONS ......................................................................................................... 7
1.6 SOCIO-ECONOMIC JUSTIFICATIONS .......................................................................................... 8
1.7 RECOMMENDATIONS........................................................................................................................ 8
2. PROJECT BACKGROUND INFORMATION ......................................................................................... 9
2.1 COMPANY / APPLICANT ................................................................................................................... 9
2.2 PROMOTER’S PROFILE ................................................................................................................... 10
2.3 LOCATION OF PROJECT ................................................................................................................ 10
2.4 PURPOSE OF THE PROJECT ........................................................................................................ 10
2.5 BUSINESS OBJECTIVES ................................................................................................................ 11
2.6 PROJECT STRATEGY ....................................................................................................................... 11
2.7 ECONOMIC BACKGROUND IN RELATION TO THE PROPOSED INVESTMENT .......... 11
2.8 FEATURES OF THE AGRICULTURE SECTOR ......................................................................... 13
3. DESCRIPTION OF SISAL PLANT CULTIVATION ............................................................................... 17
3.1 AGRONOMICAL PRACTS OF SISAL CULTIVATION................................................................ 17
3.1.1 ECOLOGICAL REQUIREMENT................................................................................................. 17
3.1.2 PLANTING MATERIAL ................................................................................................................ 18
3.1.3 NURSERY MANAGEMENT ........................................................................................................ 19
3.1.4 PLANTING IN THE MAIN FIELD .............................................................................................. 20
3.1.5 LAND PREPARATION ................................................................................................................. 20
3.1.6 SIZE OF PITING ............................................................................................................................ 20
3.1.7 SPACING OF PLANTING ............................................................................................................ 20
3.1.8 TIME OF PLANTING .................................................................................................................... 21
3.1.9 INFFILING OR GAP FILLING ..................................................................................................... 21

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 3.1.10 MULCHING ................................................................................................................................. 21
3.1.11 INTER CROPPING ..................................................................................................................... 21
3.1.12 FERTILIZER APPLICATION..................................................................................................... 21
3.1.13 HARVESTING ............................................................................................................................. 22
3.1.14 YIELD ........................................................................................................................................... 22
3.1.15 PROCESS FLOW SISAL CLITIVATION ................................................................................ 23
4. PRODUCTION DESCIRPTION AND APPLICATION ............................................................................ 24
4.1 MARKET STUDAY AND PLANT CAPACITY ................................................................................ 24
4.1.1 ETHIOPIA GREEN COFFEE EXPORT TO WORLD .............................................................. 24
4.1.2 THE PAST SUPPLY OF JUTE IN ETHIOPIA .......................................................................... 26
4.1.3 DEMAND PROJECTIONS ........................................................................................................... 27
4.1.4 PRICING AND DISTRBUTION ................................................................................................... 28
5. TECHNICAL STUDY OF FARM AND PROCESSING PLANT ........................................................... 30
5.1 PROJECT LOCATION ....................................................................................................................... 30
5.2 PHYSICAL AND NATURA CONDITION OF PROJECT SITE .................................................. 30
5.2.1 TOPOGRAHIC FEATURS ........................................................................................................... 30
5.2.2 NNFRSTRUCTURES ................................................................................................................. 32
5.3 FARM CAPACITY AND PRODUCTION PROGRAM .................................................................. 33
5. 3.1FARM CAPACITY ......................................................................................................................... 33
5.4 FARM CONSTURACTION OPERATIONS .................................................................................... 33
5.4.1 PRE-OPERATING ACTIVITIES .................................................................................................. 33
5.4.2 LAND AND PLANT LAYOUT ...................................................................................................... 34
5.4.3 LAND DEVELOPMENT ............................................................................................................... 34
5.4.4 LAND PREPARATION ................................................................................................................. 35
5.4.5 LAND UTILIZATION PLAN ......................................................................................................... 35
5.4.6 FARM BUILDING AND CIVIL WORKS .................................................................................... 37
5.5 MATERIALS AND INPUTS ............................................................................................................... 37
5.5.1 FARM PLANTING MATERIALS REQUIREMENT .................................................................. 37
5.5.2 Nursery Establishment and FARMING COST ..................................................................... 38
5.5.3 ANNUAL PLANTING PLAN OF THE PROJECT ..................................................................... 39
5.6 CROP MAINTENANCE ...................................................................................................................... 40
5.6.1 APPLYING MANURES AND FERTILIZERS ............................................................................ 40

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 5.6.2 WEED CONTROL AND MULCHING ........................................................................................ 41
5.6.3 FARM PROTECTION ................................................................................................................... 41
5.7 HARVESTING ...................................................................................................................................... 41
5.7.1 HARVESTING OPERATIONS .................................................................................................... 41
5.7.2 FARM YIELD AND YIELD ESTEMATION ............................................................................... 42
5.8 FARM MACHINERY AND VEHICLES .......................................................................................... 42
5.9 NURSERY EQUIPMENT COST ...................................................................................................... 43
6. PROCESSING TECHNOLOGY AND ENGINEERING ......................................................................... 44
6.1 SISAL SACK PRODUCTION AND PROCESSING ..................................................................... 44
6.1.1 INDUTRY CAPACITY AND PRODUCTION PROGRAM ........................................................ 44
6.1.2: SISAL FIBER EXIRACTION AND PROCESSING................................................................. 45
6.1.3 PROCESSIG OF THE FIBRES .................................................................................................. 46
6.1.4 SACK PRODUCTION AND PROCESSING .............................................................................. 47
6.2 MATERIALS AND INPUTS ............................................................................................................... 48
6.2.1 MATERIALS................................................................................................................................... 48
6.3 UTILITIES ............................................................................................................................................. 49
6.4 MACHINERY AND EQUIPMENT.................................................................................................... 49
6.4.1 SISAL FIBER EXTRACTION MACHINERY AND EQUIPMENT ......................................... 49
6.4.2 SACK PROCESSING MACHINERY AND EQUIPMENT ....................................................... 50
6.5 SOURCE OF TECHNOLOGY .......................................................................................................... 51
6.6 LAND, BUILDING AND CIVIL WORKS FOR INDUSTRY........................................................ 51
6.7 PODUCTS AND REVENUE ............................................................................................................ 53
6.8 TOTAL PRODUCTION COSTS OF THE JUTE BAGS .............................................................. 53
6.9 MAINTENANCE & REPAIRS ........................................................................................................... 54
6.10 OFFICE FURNITURE & EQUIPMENT ....................................................................................... 55
6.11 INDUSTRY OPERATING ACTIVITIES ........................................................................................ 55
6.11.1 PRE-OPERATING ACTIVITIES ............................................................................................... 55
7. ENVIRONMENTAL IMPACT ASSESSMENT ........................................................................................ 57
8. PROJECT ORGANIZATION AND MANPOWER REQUIREMENT .................................................... 58
8.1 FORM OF BUSINESS ....................................................................................................................... 58
8.2 ORGANIZATIONAL STRUCTURE OF THE FARM .................................................................... 58
8.3 MAN POWER REQUIREMENT ....................................................................................................... 59

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 8.4 TRAINING REQUIREMENT ............................................................................................................. 60
9. FINANCIAL APPRAISAL OF THE PROJECT ....................................................................................... 61
9.1 INTRODUCTION ................................................................................................................................. 61
9.2 FINACIAL APPRISAL OF INVESTING IN SISAL SACK PROCESSING AND
MARKETING................................................................................................................................................ 61
9.2.1 OBJECTIVES ................................................................................................................................ 61
9.2.2 DATA DESCRIPTION AND ASSUMPTIONS ........................................................................... 62
9.2.3 FINANCIAL APPRAISAL ............................................................................................................. 65
9.3 FINANCIAL STUDY OF THE INVESTEMENT ............................................................................ 66
9.3.1 PROJECT INVESTMENT AND WORKING CAPITAL REQUIREMENTS .......................... 67
9.3.2 FINANCIAL BUDGET OF THE INVESTEMENT .................................................................... 68
9.3.3 MEANS OF FINANCE.................................................................................................................. 68
9.4 FINANCIAL VIABILITY ...................................................................................................................... 69
9.4.1 INCOME STATEMENT ................................................................................................................ 69
9.4.2 CASH FLOW STATEMENT AND BALANCE SHEET ........................................................... 69
9.4.3 PAY BACK PERIOD ..................................................................................................................... 70
9.4.4 INTERNAL RATE OF RETURN ................................................................................................. 70
9.4.5 NET PRESENT VALUE (NPV) .................................................................................................... 70
9.4.6 BREAK EVEN ANALYSIS .......................................................................................................... 70
9.5. LOAN REPAYMENT SCHEDULE ................................................................................................. 70
9.6 SENSITIVITY ANALYSIS .................................................................................................................. 71
9.6.1 RISK AND UNCERTAINTY......................................................................................................... 71
9.7. SOCIO-ECONOMIC BENEFITS .................................................................................................... 71
10. CONCLUSIONS AND RECOMMENDATIONS ................................................................................... 73
10.1 CONCLUSIONS .................................................................................................................................. 73
10.1.1 MARKET FEASIBILITY ............................................................................................................ 73
10.2.2. TECHNICAL FEASIBILITY ..................................................................................................... 73
10.2.3 FINANCIAL FEASIBILITY ........................................................................................................ 74
10.2.4 OVERALL FEASIBILITY ........................................................................................................... 74
11. ANNEXTURE ............................................................................................................................................ 75

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ACRONYMS
ADLI Agricultural Development-Led Industrialisation

ECX Ethiopian Commodity Exchange

ETB Ethiopian Birr

FDRE Federal Democratic Republic of Ethiopia

GDP Gross Domestic Product

GTP Growth and Transformation Plan

ha Hectare

KA(s) Kebele Administration(s)

KM Kilo Meter

m.a.s.l. Meters above sea level

mm Millimetre

MoARD Ministry of Agriculture and Rural Development

MoFED Ministry of Finance and Economic Development,

oC Degree Cellicious

PIF Policy and Investment Framework (of Ethiopian

Agricultural Sector)

PLC Private Limited Company (Pvt. Ltd. Co)

Qtl(s) Quintal(s)

USA United States of America

USD United States Dollars

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1. SUMMARY OF THE PROJECT

1.1 PURPOSE OF THE JROJECT REPORT

The present investment feasibility study plan is established with view to establish
new large Scale Sisal farm, Manufacturing and Marketing by YESIGET
MANUFACTURING SISAL DEVELOPMENT FARM AND JUTE BAG PROCESSING,
PLC investment land size of 1500 ha at Guraferda wereda of Bench Maji Zone,
SNNPR Regional States. This summary highlights the key points of feasibility
business plan and investment requirements.

1.2 DESCRIPTION OF THE INVESTMENT BUSINESS

The investor is planning to invest on the production of exportable quality Sisal fibers
and manufacturing jute bags including sisal bead mat. These fibers are currently
one of the major shortage raw materials for jute bag producing industry in the
country and the project is in line with government interest and policy which focuses
on market oriented agricultural industry input production. It is also in line with
agricultural strategy of the SNNPR government and contributes to the recent
undertakings of the region on agricultural industry development corridors plan.

The proposed project is will specialize on commercial farm production of export

standard of sisal fiber strands and bags. The modern commercial farm targets export
market after and production of the products at the investment land studied by the
investor of 1500 ha. The commercial farm yearly average production capacity within
1496.91 ha of land an average of 15,696 ton fibers and 9,774,174 million
pieces of jute bags per annum. The proposed investment area for the envisage
project found at SNNPR Regional state, Bench Maji Zone, Guraferda wareda, at
the specific locality known as Guraferda. Location of the Project area is situated
between 6° 10΄N and 37°10΄ E, Longitude; and, Latitude

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1.3 RATIONAL BEHIND THE PROJECT
The some of the rational for establishment of the envisage farm with modern
mechanized commercial farm and manufacturing industry establishment investment
infrastructures and post-harvest processing facility for the local and export market
are,

Policy: Government second round five years strategic plan, which promotes new
investment in agro-industrial sector and specially encourages commercial farm
products of fruits, Spices, oil seeds and industry raw materials which directly or
indirectly contribute to import substitution and exportable ones.

Labor: There is plenty of skilled and semi-skilled labor in Ethiopia. The country has
a good education system that churns out a number of graduates in most key
professions at all levels.

Availability of raw materials: The improved plat which is available at domestic

level for the project farming materials in the country, and improved Varity is
available at international market in Africa like Tanzania and Kenya and locally
research centers

Market: High market demand supply gap in the country which is avail for the local
market of 9,774,174 million pieces of jute bags the envisage project target.

1.4 INVESTMENT CAPITAL

The total capital investment cost of the project is estimated to be Br 21.961 million.
The part of the cost will be covered through bank loan of 15.328 million birr for
financing the project on equity to debit ratio of 30:70 the balance of the investment
cost will be financed by promoter and or it can be lease financing bank loan
approach by negotiating with development bank.

1.5 LAND AND CONSTRUCTIONS

The project required a total area of 1500 ha. The project land utilization plan for the
sisal plant cover area is used 1496.91 ha and for the manufacturing facility and

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 farm will be used 3.09 ha for construction of farm store, processing shade, other
buildings, and farm production of project facility.

1.6 SOCIO-ECONOMIC JUSTIFICATIONS

 The project is expected to transfer quality sisal fiber production farm and
manufacturing management skills to the surrounding area through the
demonstration effect of the farming and partly through the employment opportunity
to be generated the raw materials and its income. The project will employ 58
production technical and 17 administrative totally 75 staff workers in permanent
employment bases and 150 casual laborers every year throughout the project life.
 The Federal as well as the Regional governments would also receive substantial
amount of revenue in the form of different taxes including profit tax. The project
will at full capacity of production at fourth year will generate tax revenue of
17.141 million birr per annum

1.7 RECOMMENDATIONS
All the aforementioned facts discussed above and the feasibility study on market,
technical, financial, and social point of view proves the project is viable business
plan and one of the government's priorities, which contributes for the government
strategy on development worth deserving encouragement and support from the
pertinent government offices.

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2. PROJECT BACKGROUND INFORMATION
2.1 COMPANY / APPLICANT

Yesiget Manufacturing Sisal Development Farm and

Name of Owner
Jute Bag Processing PLC

Ethiopian (i.e. Registered with the Investment Unit of Bench

Nationality:
Maji Zone, SNNPRs )

Yesiget Manufacturing Sisal Development Farm and

Owner(s):
Jute Bag Processing PLC

Type of business: SISAL development for Natural fiber and Jute Production
Full Address : Addres Mobile: 0917 825825

E-mail: : anileyenyew@gmail.com

SISAL DEVELOPMENT FARM AND JUTE BAG(SACK)

Project Name:
MANUFACTURING INDUSTRY ESTABLISHEMENT PROJECT
Status of the Project: New
Proposed Site: Guraferda Werda, Bench Maji Administrative Zone, SNNPRS

Specific location: Within in the rural areas surrounding Guraferda Wereda

Size of proposed land: 1500 ha

Total estimated capital: 21.961 Million Birr
Legal Form of organization: P.L.C.
Registering office: Bench Maji Zone Investment Unit, SNNPRS
Taxpayer Identification No.: ---------------

Right of Occupancy: Lease agreement

Project Period: 10 years (2018-2028)

Land lease Period 25 year or negotiating

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2.2 PROMOTER’S PROFILE
The anticipated “SISAL DEVELOPMENT FARM AND JUTE BAG (SACK)
MANUFACTURING INDUSTRY ESTABLISHEMENT PROJECT” is initiated by the
newly established YESIGET MANUFACTURING SISAL DEVELOPMENT FARM AND
JUTE BAG PROCESSING; PLC which is owned by PLC and the members of the PLC
was born in Ethiopia and currently has a Ethiopian citizenship. In view of their
education and work experiences, they bring a wealth of experience to the Company.
The Manager of the compony is Mr.Aniley Enyew. He has had more than 21 years
of work experience in Coffee tea and Spice production quality controle in Coffee tea
and Spice production quality Authority and vastly involved in cofee processing
industry technical support and controling. Mr.Aniley Enyew has extensive
experience in government organization worke process cordnation and he has BSc
degree in Plant Science and currently he has second dgrey in bucsince mangment
and, he worked more than 5 years in coffee processing and marketing. He is
involved overseeing 1500 hectares of sisal plantion farm and manufacturing of jute
bag for coffee and other export crops packing sack manfacturing materials which is
important import subsisttion of country.

2.3 LOCATION OF PROJECT

The area identified for implementing the anticipated project is located in the Bench
Maji Zone of SNNPR, at Guraferda Woreda. In terms of geographic coordinates,
Guraferda Wereda is situated between 6° 10΄N and 37°10΄ E, Longitude; and,
Latitude

2.4 PURPOSE OF THE PROJECT

The profile of these envisages is the establishment of a Sisal commercial farm for the
production of sisal fiber strands and manufacturing of jute bags by applying good
agricultural practices and industry management standards at the farm area of 1500
ha and marketing the product to domestic and export market. The overall goal of
the project is to contribute towards the economic development of Ethiopia through

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 using the existing investment opportunities in the Country and taking advantage of
the expressed policy incentives that emphasize on greater commercialization of
agriculture and enhancing private sector development. The project’s main
objective is to implement an agricultural investment and Industry establishment
project using intensive mechanized farming for the production of export-focused sisal
fiber and jute sack production; which primarily involves sisal fiber raw material for
their sack processing plant. Sisal plant cultivation reviles high standards and quality
of production. While the project ensuring optimal economic returns as well as socially
and environmentally acceptable production system. That will attain full production
level within ten years starting from the 2019 production season.

Production capacity: Export standard of sisal jute bags of 9,774,174 million

pieces /annum.

2.5 BUSINESS OBJECTIVES

 The business objectives of the envisaged farm are profitable production of SISAL
JUTE Bags and marketing the product for export market and domestic market
 As a business firm one of objective of the Company is to earn reasonable income
from the demand supply gap exists in the sector at large and at the regional
markets.

2.6 PROJECT STRATEGY

Developing the farm and constructing a project farm building as per EUREGAP / ISO
14001 regulations and commercial farm building standards

 Procures machineries and equipment’s.

 Recruit and train workers
 Setting up of the production, harvesting, manufacturing, and marketing system.
 Set up and a qualified and efficient management and technical staff recruited.

2.7 ECONOMIC BACKGROUND IN RELATION TO THE PROPOSED INVESTMENT

Agriculture is the engine of Ethiopian economic growth: Ethiopia has

undertaken a far reaching program of economic reforms over the last decade; which

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is attributed to the Government’s determination to achieve broad-based economic
growth in a stable market economy. As its major instrument towards realizing rapid
economic growth; the Ethiopian Government has been implementing to which its
strategy of Agricultural Development-Led Industrialisation (ADLI) that sees
agriculture as the engine of growth. Along with other multifaceted policy and
regulatory interventions of the reform, the Government has put appropriate
regulations into place in order to encourage both domestic and foreign investment,
particularly in agriculture and agro-processing.1,2

Over the last seven years in particular, the reforms have delivered strong economic
growth. The economy has registered rapid growth rates averaging 11.0 per cent per
annum over the past seven years, placing Ethiopia among the top performing
economies in sub-Saharan Africa. Building on the achievements of the last ten years,
Ethiopia aims to become a food-secure middle income country through the ADLI
strategy. Agriculture and rural development has been the central pillar of successive
national development and poverty reduction plans and remains so under the Growth
and Transformation Plan of the next 5 years (2013-17).1 Accordingly, “Maintaining
agriculture as a major source of economic growth” constitutes one of the ‘Pillar
strategies’ on which the GTP hinges to realize Ethiopia’s drive towards sustaining the
rapid and broad-based growth path.1,2

According to projections based on the recent national census of the country 3; the
current total population of Ethiopia is estimated over 80 million. The population
growth rate for 2001-2007 was 2.6% and the population is projected to reach 96
million by 2015.4 Over half of the population (65%) is below 24 years of age largely

1MoARD/FDRE, 2010. Ethiopia’s Agricultural Sector Policy and Investment Framework (PIF) 2010-2020 (Draft Final Report). Ministry of
Agriculture and Rural Development, Federal Democratic Republic of Ethiopia; 15 September 2010, Addis Ababa

2MoFED/FDRE, 2010. Growth and Transformation Plan (GTP): 2010/11-2014/15 (Draft). Ministry of Finance and Economic Development
(MoFED), the Federal Democratic Republic of Ethiopia; September 2010, Addis Ababa.

3FDRE – PCC, 2008. Summary and Statistical Report of the 2007 Population and Housing Census: Population size by age and sex. Federal Democratic Republic of

Ethiopia, Population Census Commission; December 2008, Addis Ababa

4World Bank, 2009. Key Development Data & Statistics. World Development Indicators database Retrieved from:

http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20535285~menuP
K:1192694~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html

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influencing the very high dependency ratio of 93. Roughly 84% of the population lives
in rural areas.3,4

Ethiopia is endowed with immense natural resources that offer it greater comparative
advantages of producing different type’s agricultural products and it is a country of
great agro-ecological diversity having areas of different physical features and
altitude. This variation is mainly correlated with great diversity of climate, soil and
vegetation cover that are favorable conditions for agricultural development.

The Federal Democratic Republic Government of Ethiopia (FDRE) has undertaken

policy, strategy and institutional reforms in all sectors with special emphasis to
agriculture. The policy and strategies of the federal and regional governments
encourage investors to fully participate in owning all large and medium scale
business in the agriculture sector. The strategies focus on selected high-potential
areas and modern agricultural technologies to be prioritized export crops like high
value fruits and vegetables, sesame, cotton, tea, soybean, groundnut, sunflower, bio-
diesel plants,. The Ministry of Agriculture and Rural Development has also identified
agricultural investment areas and prioritized investment areas for the focused
interventions.

In view of this background, YESIGET MANUFACTURING SISAL DEVELOPMENT FARM

AND JUTE BAG PROCESSING, PLC has been interested to invest on the production of
tomato and onion in Guraferda Wereda, Guraferda Kable. Bench Maji,
administrative Zone, in SNNP- Regional State. The specific location of the proposed
investment area is situated around the area described by geographic coordinates
10′ 0″ N, longitude and 37° 45′ 0″. E latitude; which refers to the rural areas
surrounding Guraferda Kable.

2.8 FEATURES OF THE AGRICULTURE SECTOR

The agricultural sector greatly influences economic performance in Ethiopia.

Approximately 95 per cent of agricultural GDP and 85 per cent of employment is
contributed by smallholder households, which are estimated at about 11.7 million.
With its total area of about 1.13 million km2 and about 51.3 million hectares of

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arable land, Ethiopia has tremendous potential for agricultural development. Yet, only
about 11.7 million hectares of land is currently being cultivated; which accounts just
over 20 per cent of the total arable area. Nearly 55 per cent of all smallholder farmers
operate on one hectare or less. The agricultural sector accounts for roughly
43 per cent of GDP, and 90 per cent of exports. Cereals dominate Ethiopian
agriculture, accounting for about 70 per cent of agricultural GDP. Over the past
decade, cereal production has more than doubled to nearly 15 million tones, as a
result of horizontal expansion and increased yields.1

Ethiopian agriculture is dominated by subsistence, low input-low output, rainfed

farming system. The use of chemical fertilizer and improved seeds is quite limited
despite Government efforts to encourage the adoption of modern, intensive
agricultural practices. Low agricultural productivity can be attributed to limited access
by smallholder farmers to agricultural inputs, financial services, improved production
technologies, irrigation and agricultural markets; and, more importantly, to poor land
management practices that have led to severe land degradation.

The agricultural sector has performed strongly over most of the last decade, but there
is still substantial potential to improve productivity and production. Since 1996/97
the average growth rate of the agricultural GDP has been about 10 per cent
per annum, and since 2004-05 the sector has been reported to have expanded at
around 13 per cent per annum. On the other hand, the share of agriculture in GDP
declined from 53 per cent to 43 per cent between 1995/96 and 2008/09,
reflecting strong growth in other sectors of the economy.

The Government, with strong support from development partners, has made different
strategic interventions to enhance the delivery of improved production technologies
and support services thereto. Over the past several years, the Ethiopian Government
has demonstrated strong commitment to agriculture and rural development through
allocations of more than 10 per cent of the total budget. Despite these
achievements, however, the Government recognizes much remains to be done in the
agriculture sector to realize the vision to become a middle income country (defined as
GDP/capita of USD 1,000) by 2020.

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2.9 JUSTIFICATION OF THE PROJECT: WHY IT IS PROPOSED?

There are a number of reasons that led YESIGET MANUFACTURING SISAL

DEVELOPMENT FARM AND JUTE BAG PROCESSING, PLC to opt for the specific
project: Bench Maji Zone Bifitu Sisal Development Farm and Manufacturing
Industry Project. Firstly, Ethiopia’s climate is suitable for most crops including
tomato and onion. Secondly, the Country is among the most coming of organic
producers of vegetables in the world and has a well-established linkage to the major
global markets. The growing trends of the establishment of manufacturing industries
in the country as a whole and super market and small agro-processer in particular,
and their demand for raw material inputs such as raw vegetables for manufacturing
of various cannery has made the business very important. The enabling policy
environment prevailing in Ethiopia; which encourages investors to fully participate by
investing in the agriculture sector, is also another important factor to initiate the
project.
Besides the suitable climate of Ethiopia for tomato and onion cultivation; YESIGET
MANUFACTURING SISAL DEVELOPMENT FARM AND JUTE BAG PROCESSING,
PLC has a distinct comparative advantage from the very beginning by adopting a
modern way of mechanized farming, especially in the production of vegetables that
will put it in the top1% of producers who employ the same technology.

In addition, extended market research has been carried out from both the higher end
markets as well as lower end markets. There is a huge local market for vegetables.
The Benefit Cost Ratio (BCR), which is included in the financial feasibility section
of this plan, was carried on different primary crops. This helped YESIGET
MANUFACTURING SISAL DEVELOPMENT FARM AND JUTE BAG PROCESSING,
PLC to choose vegetables, which have a vast market worldwide.
2.10 SUPPORTS FOR THE PROJECT

There are some supportive roles expected from the Federal and Regional states in
ensuring smooth and effective implementation as well as long-run sustainability of
the anticipated project. Particularly important roles for the states are establishing

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and adjudicating land acquisition requirements and right of occupancy as well as
associated contractual processes and regulatory functions. This includes, among
others, monitoring and regulating externalities and third party effects on land
occupancy and subsequent implementation of the project, maintaining a supportive
legal framework, providing relevant technical and organizational supports towards
facilitating effective and smooth implementation of the project. The latter particularly
involves access and use of data/information and technical advice from government
research institutions and line bureaus/agencies.

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3. DESCRIPTION OF SISAL PLANT CULTIVATION

3.1 AGRONOMICAL PRACTS OF SISAL CULTIVATION

Different species of Agave (Agavaceae family) namely Agave sisalana, Agave
cantala, Agave vera-cruz, Agave amaniensis, Agave angustifolia and Agave
fourcryodes can produce hard fibre from its leaf. However, among the different
species, Agave sisalana contributes nearly 85% of the total sisal fiber production of
the world. Agave sisalana is a native of the Yucatan area of Mexico where the fiber
had been used by the native Mexican people for centuries. Later, around 1836, sisal
was introduced to Florida. Other than Mexico, wide cultivation of sisal was started in
Tanzania, where it was introduced by Dr. Richard Hindorf, an Agronomist from
Germany. In the present world, major sisal producing countries are Brazil, Kenya,
Tanzania, Madagascar, China, Mexico and Haiti. China is the largest sisal fiber
importing country, followed by Spain and Mexico; whereas Brazil and Kenya are the
main sisal fiber exporting countries.

3.1.1 ECOLOGICAL REQUIREMENT

It is xerophytic plant so can grow in dry climates but will not grow well in poorly
drained soil. The rate of growth of the plant and its life span depends upon the
climatic conditions, cultivation and species

Sisal is propagated from bulbils or rhizomes, and the young saplings are first grown
in nurseries for about 12 to 18 months. After this time they are planted into the large
crop fields, usually towards the beginning of the rainy season. The plants mature in
about 2 to 3 years, and remain viable and productive for the next 7 to 8 years.
Around 300 leaves are obtained from each plant during the entire productive period.

It can withstand a maximum temperature near 40-50oC and grows well with evenly
distributed rainfall of 600-125 mm. Excessive rains (causing water stagnation) and
very low temperature causing frost tend to damage the plantation.

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3.1.1.1 SOIL

Sisal thrives best on dry, permeable, sandy-loam soils with good amount of liming

materials (Ca and Mg) but can also grow on various other types of soils. In Ethiopia,

it is grown in light calcareous and gravelly soils with good drainage. Heavy soils

having possibility of water logging are not suitable as the condition causes pale and

stunted growth of sisal. Adequate calcium in soil promotes development of the root

system. It was tested that red earth and coral lime stone gives higher fiber yield of

sisal. Acidic soils with poor calcium content are not suitable for sisal plantation.

Moderate waste lands can also be utilized for sisal with economic benefits provided

adequate care is taken by fertilizing the crop and adopting suitable agricultural

practices including soil ameliorants.

3.1.2 PLANTING MATERIAL

Growth of sisal plant is terminated with the emergence of flowering stalk known as
‘pole’. Fruits are seldom formed as flower shrivel and fall owing to the formation of
an abscission layer at the top of the pedicel and therefore, setting of seeds is not
common.
Sisal is mainly propagated by vegetative means such as bulbils and suckers.
Bulbils develop from tiny buds present on each flower stalk. A bulbil is a plantlet
consisting of a meristem, 4-7 reduced leaves and rudimentary adventitious roots. A
pole of a sisal plant may produce 400-800 or more bulbils. These bulbils develop
and attain a size of 4-5 cm when they are collected during mid-February to mid-
April and raised in nurseries.
The underground adventitious shoots that develop from the roots receive favorable
condition, often come up at some distance from the parent plant above the soil
surface and develop into small plants known as suckers. After few months
nurturing, these suckers are also used as planting material for new sisal plantation.

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Suckers can be collected 3-4 times in a year from a mature plantation. Sometimes,
the suckers are left as such with the parent plant to grow
for one year or so, which can be used for planting purpose without raising them in
the nursery. Use of such suckers as planting material saves the nursery raising
cost. Attempts were made to use other methods such as somatic embryogenesis for
sisal propagation. Sisal plantlets regenerated from embryo produced through somatic
embryogenesis were transferred to the main field and the survival rate was 95% or
more

3.1.3 NURSERY MANAGEMENT

The freshly collected bulbils are raised in nurseries with an intention to produce high
quality planting materials in shortest possible time. The selected land for nursery
should be well drained, fertile (with organic matter), flat as far as practicable and
situated near the irrigation source. Pulverized and airy soils accelerate quick
initiation of roots and root development occurs rapidly. In sisal two types of
nurseries are in practice.

Preparatory or primary nursery: Preparatory nurseries are raised to rear fresh

bulbils with intensive care and management during 3-4 summer months. Very
small suckers can also be raised in such nursery when March sufficient bulbils are
not available. The spacing should be closer to accommodate more plants in a small
area and are generally spaced 10 × 7 cm in flat raised beds of 1m width. Planting
can be done with the help of marked rope and pegs. Before planting, watering is
required to create clear holes for putting bulbils in place. Bed should be weed free as
far as possible to reduce unnecessary competition.

Secondary nursery: Bulbils are transferred from preparatory nursery to the main
nursery. The roots of the plantlets from the primary nursery are pruned lightly and
the diseased and dead leaves are removed. Bulbils are treated with Cu-fungicide
before planting them into the main nursery. Planting in main nursery is started with
the onset of monsoon and completed as early as possible. A spacing of 50 cm × 25

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cm was found better for rapid development of sisal plantlets. Every 11th row is
skipped to get space facilitating weeding and other inter-cultural operation. The
recommended spacing of 50 cm×25 cm can accommodate 80,000 bulbils/ha of
which about 72-76 thousand ultimately survive for planting in the main field.

3.1.4 PLANTING IN THE MAIN FIELD

Grading of sisal planting materials proved beneficial, but it is not in practice due to
several factors including shortage of planting materials. The planting materials
should not be kept in heaps. It may be kept for 30-45 days on soil under shade in
single layer without any adverse effects on growth and fiber yield.

3.1.5 LAND PREPARATION

Being a xerophytic and hardy crop, lands available for sisal cultivation are often
sloppy, eroded and most of them are without any vegetation cover. So, it is not
advisable to plough-open the whole area encouraging further erosion. Pit planting is
recommended for such and situation

3.1.6 SIZE OF PITING

Pit size of 8cm2 is preferred for getting fast and uniform growth of sisal plants. Pits
are dug during summer months and filled up with soil-organic matter mixture. Soil
ameliorants may be used in the pits to rectify pH. Planting method. Two methods of
planting are followed. Single row planting method is conventionally practiced and
is less profitable. Whereas, double row planting method has several merits
including checking soil erosion, accommodates more plants/ha and gives higher
yield. Rows are made across the soil slops.

3.1.7 SPACING OF PLANTING

Plant density depends on nature and fertility status of soil, type of farming,
investment and management capacity of the grower. The following spacing is
suitable: 4m + 1m × 1m (4,000 plants/ha); 4m + 1m × 0.8 m (5,000 plants/ha); 3 m
+ 1m × 1m (5,000 plants/ha); 3m +1m × 0.8m (6,250 plants/ha); 2m+ 1m × 1m
(6,666 Plants/ha). For this project farm the nature of fertility status well fertile and

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new farm the applied spacing is 1.5m X 1.2m (5555 plants/ha)with in plat and
between rows respectively.

3.1.8 TIME OF PLANTING

Planting should be taken up with the onset of monsoon, so plants get sufficient time
to establish well during the favorable rainy season.

3.1.9 INFFILING OR GAP FILLING

Even after careful planting, non- surviving gaps are common; so, gap filling is
necessary in the next rainy season if irrigation facilities are not available.

3.1.10 MULCHING
Sisal waste can be used as good mulching material to conserve soil moisture. It can
also improve soil conditions and adds nutrients to the soil. Mulching can also be
practiced

3.1.11 INTER CROPPING

During the initial three years growth period of sisal, harvesting of leaves are not
recommended and during this phase inter-row space may be utilized by practicing
intercropping in double row planting system. Crops like horse gram, black gram,
finger millet and other small millets can be intercropped successfully.

3.1.12 FERTILIZER APPLICATION

Sisal in general is a nutrient demanding crop as 1tonne of sisal leaves removes 23.5
kg N, 3.5 kg P, 35 kg K, 81 kg Ca and 30 kg Mg from the soil. Therefore, sustainable
and successful cultivation of sisal depends primarily on good management of soil
fertility besides other factors. At the tail end of monsoon, hoeing and weeding are
done followed by application of fertilizers at least for the first three years of very
active growth phase. Application of fertilizers should be done according to the fertility
status of the soils and resources at disposal. In general, sisal growing soils are poor
in fertility with acidic pH range. N, P and K fertilizers @ 60:30:60kg/ha/year is
recommended for medium fertile normal soil condition.

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3.1.13 HARVESTING
First cutting, in general, starts at 3 ½ years crop age. However, in intensive
cultivation programme with appropriate care, first harvest can start at 2 ½ years of
age also. At first cutting 16 leaves and in each subsequent cutting 12 leaves are left
on the plant. Harvesting during November to February is advised considering
several factors like comparatively lower temperature, minimum rain hindrance,
restricted active growth and economy in harvesting and extraction operation. After
cutting, the leaves are bundled (say 50 numbers) and the bundles are transported
to the extraction unit. Extraction of fiber is done on the same day or preferably next
day as early as possible.

3.1.14 YIELD
Sisal productivity is highest with proper care and attention and by using improved
cultivation techniques, the fiber yield could be achieved to 1.7 to 2.5 tones/ha. For
the envisaged project 3.6 tones /ha for fiber strands as take as expected yields

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3.1.15 PROCESS FLOW SISAL CLITIVATION

PREPARING THE LAND

Clearing and
weeding Preparing the bed

Farming
Farming
Steam Farm

Tissue Culture

Mulltplicat
ion on at
Field Nuresery
Nurser Farming Farming Suckers

Establshing a Covering Mulching

Farm Plastic

Maintaining
the Crops

Fertilizer
Applications Weed Control

Controlling Prunning
Plagues and Illnes

Harvest

Page 23 of 83
4. PRODUCTION DESCIRPTION AND APPLICATION
Sisal is a naturally growing fiber plant extending lengthwise through pulpy tissues of
long leaves or leaf stems of tropical plant, which are long and multiple celled. This
fiber could be woven into rope which is mainly used for packing manufacturing raw
materials of various types.

The sisal fiber is highly durable, stretchable, strong, and resistant to saltwater. The
higher grade sisal fibers are used to make yarn for carpet weaving. Moderate grade
fibers are deemed suitable for use in making marine, shipping, agricultural, and
industrial ropes and twines, while lower grade sisal fibers are processed by the
paper manufacturing industries to make paper products. A variety of other products
involving the use of sisal fibers include rugs, slippers, spa products, and cat
scratching posts. Sisal is also used as reinforcement in polymer composites like
plastic and rubber, and these are used in the manufacture of automobiles, boats,
and water tanks. The by-products of the sisal fiber processing industry are often
utilized as livestock feed or fertilizers, as well as for the production of bio-gas,
pharmaceutical products, and building materials.

4.1 MARKET STUDAY AND PLANT CAPACITY

4.1.1 ETHIOPIA GREEN COFFEE EXPORT TO WORLD

Ethiopia known Arabica coffee exports to the world. However, the utilization of the
sub sector’s potential for generation of export earnings for the national income at
large. The export of coffee has in general been showing increasing trend in volume
and value terms. Currently Ethiopia Export crops not only coffee but also exports
various type of crops such as oil seeds, plus and fruit and vegetables. For this
reasons the packing materials demand increase time to time with this the demanded
of sisal and jute fiber sack usually comes from the world import country customers.
For meet the demand of the world export market sisal products are produced in
Ethiopia by three public enterprises, namely; G-7 Fiber Product Factories, Meher,
Ethiopia Fiber Product Factories and. New Weave Drediwa Jute factories. Ethiopia

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also imports products made from sisal yarn such as rugs, carpets. However, import
data is lump summed with other products.

Accordingly in the absence of data in sisal yarn products the demand for sisal yarn
is estimated based on the demand for sisal sacks. The demand for sacks usually
comes from the agricultural and industrial sector. In good crop season years, it is
estimated that over 26 million quintals of grain enter the market which require
sacks for handling. In addition two million quintals of coffee and 10 million
quintals of vegetable enter the market. The agro-industrial sector is also a major
user of sacks. The sugar industries, flour mills, pasta & macaroni factors, salt
producers and masteries use sucks to handle their final goods. In general, some 50
million pieces of sacks are required to handle agricultural and industrial products
that enter the commercial system.

Commercial marketing sacks are of two types; i.e. those made of sisal fiber and
those made of synthetic fiber. Large quantity of synthetic fiber sacks come from
abroad with food grain and fertilizers and farther used in handling grain. Thus, the
large proportions of sacks are those made of synthetic fiber. Sacks made of sisal
fibers are preferred over sacks made of synthetic fiber particularly for handling of
coffee. Importers of coffee make a particular requirement that coffee should be
packed in sisal fibers.

The demand for sisal fiber emerges from two sources, i.e. for incremental production
and for replacement. Sisal fiber sacks cannot be used for more than one crop season.
Thus, they have to be produced to meet replacement demand and additional
production. In addition different groups are involved in production and marketing of
crops that require fiber sacks as packaging.

There are producers, local assemblers and regional trader and exporter in the case of
coffee and oil crops. Each of the parties uses their own packaging of sisal fiber
sacks. Thus, the amount of sacks required to handle the crops that enter the
commercial system is nearly threefold of the amount produced for each of the parties

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involved in the use of their own packaging. Table 4.1.1 shows export of difference
agricultural products that require fiber sacks for packaging

Table 4.1.1: Major Export Products (“000” tones)

Type 1999 2000 2001 2002 2003 2004 2005

Coffee 32.3 67.5 69.2 52.8 97.7 123.2 120.1

Oil seeds 1.8 0.4 10.2 12.1 7.8 14.1 66.6
Pulses 1.4 1.5 9.8 25.8 29 30.5 30.9
Fruit &
vegetable 7.2 6.1 15.9 19.5 19 21.8 17
Total 42.7 75.5 105.1 110.2 153.5 189.6 234.6
Source: - National Bank of Ethiopia

As can be seen from Table 5.1, the total export figure increased from 42.7 thousand
tonnes in 1999 to 234.6 thousand tons in 2005. The remarkable growth in export is
a result of deregulation and currency devaluation which created incentives for
producers to increase their supply quality.

If we assume an average of 200 thousand tons of export crops, the number of

sisal fiber sacks required to handle these volume is about 6 million pieces.
Furthermore, as indicated earlier the volume of agricultural products that enters the
commercial system is around 50 million quintals, annually. Since bulk transport is
not common, invariably all these products are transported in bags.

Assuming that sisal fiber sacks account for 20% of the requirement, the annual
demand for sisal fiber sacks can be estimated at about 20 million pieces

4.1.2 THE PAST SUPPLY OF JUTE IN ETHIOPIA

Jute bags are mainly used to pack sugar, grain, coffee, cotton and other agricultural
products, which are packed in weight ranging from 50 to 100 kg. Jute bags used in
the agro-based products treated with vegetable oils to destroy the harmful effect of
hydrocarbons are also called hydrocarbon free bags. Due to their biodegradable
nature jute bag is becoming and eco-friendly alternative.. The supply of jute bags is
almost met through domestic production. The two jute bag producing factories

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supply for the last nine years was on average 5,433.33 tons per annum and or
5,433,330 kg (5,433,330 pieces) See bellow Table 4.1.2.

Table 4.1.2: Supply of Jute Sacks in Tones

Year Total Local Import

2004 9,206 6,418 2,788
2005 8,194 7,649 545
2006 5,114 4,981 133
2007 5,729 5,708 21
2008 5,981 5,981 0
2009 5,709 5,691 18
2010 3,996 3,960 36
2011 3,315 3,315 0
2012 5,163 5,163 0
2013 5,512 5,467 45
Total 57,919 54,333 3,586
Average 5,791.90 5,433.30 358.60
Source: CSA Annual Survey of Manufacturing Industry Customs Authority

The estimate for the domestic production of the jute bags indicates a negative trend.
The negative trend is due to the substitute product of PP sacks which are
increasingly substituting grain and flour sacks. In addition to this shift of demand
from natural sacks to synthetics there is also a raw material supply delay and
production interruption due to working capital problems as the raw material, jute is
imported from Bangladesh. The demand shift is explained by the very wide gap of
the unit price of jute bag which is more than 70 birr as against two Birr for PP sacks.
Therefore the current effective demand is expected to be the average supply of the
past nine years at 5,430 tones.

4.1.3 DEMAND PROJECTIONS

The current supply of sisal fiber sacks from Meher and Ethiopia Fiber Factory is 10
million pieces/ year. The current demand is estimated at 20 million pieces, out of
which 6 million pieces is meant to handle export crop which is a requirement. This
shows a deficit of 10 million pieces per year. Although export showed more than
10% growth over the past years, the total agricultural production grew by less than

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2%. Hence, considering annual growth rate of 2%, the projected demand is shown in
Table 4.1.3.

Table 4.1.3: Demand Projection (in million pieces)

years Current Supply Demand Gap

2018 10 20.00 10.00
2019 10 20.40 10.40
2020 10 20.80 10.80
20.21 10 21.22 11.22
2022 10 21.65 11.65
2023 10 22.10 12.10
2024 10 22.53 12.52
2025 10 22.97 12.97
2026 10 23.43 13.43
2027 10 23.90 13.90
2028 10 24.37 14.37
The demand gap increases from 10 million pieces in year 2018 to 14.37 million
pieces by the year 2028.

4.1.4 PRICING AND DISTRBUTION

The current selling price of Meher sisal fiber and New Wave Dierdia sacks is Birr
72.80/piece. It is expected that the envisaged plant will adopt this sales price. Major
importer and whole sellers as well as manufactures will place direct order to the
plant and production takes place accordingly. Sales agents can be used in high
market concentration areas.

The supply of package depends upon imports of half-finished row materials. A

sufficient supply of raw materials sisal fibers will result in large quantity of products
availability in the market. In Ethiopia the supply of packaging jute irregular patterns
due to lack of supply raw materials jute products. For this project seasonal
availability calendar of the above jute bags packing materials is as shown below

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 Table 4.1.4.: Bar diagram showing periods of supply of sisal Jute Bags

Segment/Produc Months
ts

Jan Feb Mar Apr May Jun Jul Agu Sep Oct Nov Dec

Sisal Jute Bag

The high demand of supply during October to June and the medium used for supply
mechanism of sisal jute bags from July to September during coffee export and the
most prevailing marketing channels for supply to jute bags through whole seals
individuals, coffee suppler cooperatives and private.

Page 29 of 83
5. TECHNICAL STUDY OF FARM AND PROCESSING PLANT

5.1 PROJECT LOCATION

Location of a project is determined on the basis of proximity to raw materials,
availability of infrastructure and distance to potential market areas. Potential
suitable area selected for the establishment of sisal plant cultivation farm and
establishment of sisal bags processing plant at Guraferda. Guraferda is one of the
woredas in Southern Nations, Nationalities, and Peoples' Region of Ethiopia. Part of
the Bench Maji Zone. Guraferda is bordered on the south by Bero, on the west and
north by the Gambela Region, on the northeast by Sheko, on the east by Debub
Bench, and on the southeast by Meinit Shasha. Towns in Guraferda include
Guraferda. Guraferda was separated from Sheko woreda. It is located 622 km south
of Addis Ababa VI Gambela Region to south Sudan, 42 km from Amani town. Based
on the 2007 Census conducted by the CSA, this woreda has a total population of
35,271, of whom 19,410 are men and 15,861 women; 4,991 or 14.15% of its
population are urban dwellers. It has a high elevation of 1350 and a lowest 1100
meters above sea level.

The locality of this project is based on soil, rain fall, temperature and altitude
requirement technically feasible for establishment of sisal fibers production farm and
industry as it full files for existing local packaging material production land quality
requirements.

5.2 PHYSICAL AND NATURA CONDITION OF PROJECT SITE

5.2.1 TOPOGRAHIC FEATURS

The project site is located within the 42km from Bench Maji Zone town of Amani and
622 km from Addis Ababa capital city of Ethiopia. The topographic features of the
proposed project area are characterized by flat to gently sloping terrain. The average
altitude of the project area is range from 1100-1350 m.a.s.l; with general land
gradient of not more than 1.5 to 2.5 %. The project area in the Guraferda woreda is
categorized as Kolla (wet to sub-wet humid) area.

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 The topography of the project area generally indicates availability of favourable opportunity
for low cost installation of infrastructures and land preparation requirements. Around the
project areas there are different coffee private farm and processing industry in the
international rode-way of Ethiopia to South Sudan.

• Climate: The climatic conditions of the project area could be broadly categorized as
sub-tropical, warm sub humid moist lowlands. According to traditional classification
of agro-climatic zones in Ethiopia; and, considering the high rainfall, low altitude
(1100-1350 m.a.s.l.); the project area might be classified as ″wet worm″. The specific
feature of the project area in terms of temperature is from 40 to 50oc and a rainfall
pattern is average 1550mm.

 Temperature; According to the climatic data obtained from the Ethiopian Meteorology
Agency; the average minimum and maximum temperatures of the project area are
35.97oC and 39.19 o C respectively. Therefore, sisal grows best in subtropical
climates. The plant grows well in hot climate with temperatures between 10 to 32 °C.
The maximum temperature should be 40 to 50 °C, with minimum temperatures of 5
°C.

 Rainfall Trend: The project area has average annual rainfall of 1550 mm; which is
higher than the average precipitation requirements of most field crops. The plants are
not frost tolerant and produce the best in areas with an annual rainfall of 500 mm
and higher. An annual rainfall average of between 600 to 1500 mm is required. The
monthly rainfall distribution of the Wereda shows that the area has 7 wet months
are May – October, during which 95.7% of the annual rainfall occurs
Soil Conditions of the Project Area: The plant is not soil specific, but it
grows best in well-drained loamy soil. Sisal can be cultivated in most soil
types except clay and has low tolerance to very moist and saline soil
conditions. Soil pH of between 4.0 and 6.0 is important. Results of soil sample
analysis from the project area indicate that the major soil textures are clay and
sandy loam with strong coarse structure. The PH of surface soil ranges from 5.1- 6.9,
which implies moderately alkaline soils. These soils are chemically and physically

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suitable for cotton, soybean and sesame cultivation and Sissal. In addition, the
proposed investment area refers to well drained soils that occur on almost flat to
gentle slope. The proportion of the land is suitable to most of annual crops and
perianal crops. Therefore, this envisaged project soil, rain fall, temperature
requirement is suitable, by this the project feasible for the sisal cultivation and sisal
bags processing and production.

5.2.2 NNFRSTRUCTURES

Road: Generally, the project area can be accessed by all-weather roads up to its
wereda town. Guraferda is located at 42 km away from Amani town and connected
with all-weather roads.

Electric Power: The wereda town of Guraferda of the project area has access to
hydroelectric power.

Water Resources: Generally, shallow well and boreholes are the main sources of
water supply in the Guraferda werda. Currently, access to safe drinking water is a
significant problem in the project area. However, the Water Resource Bureau and
other stakeholders in collaboration with the community has established different
safe water generating schemes such as hand dug well, hand pump, developing
spring water, deep well and shallow well to alleviate the problem.

Telecommunication: According to the data collected from the Bureau of Finance

and Economy, the wereda town and the surrounding PAs in the project area have
access to different telephone services, such as, wire line, mobile telephone service,
and wireless.

Financial Institutions: There is one bank in Guraferd werda town. There is

government banks in the project district Guraferda which is found at a distance of 30
km.

Health Services: The project area can get hospital service from the closest Guraferd
located 10 kms from project area wereda town.

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 5.3 FARM CAPACITY AND PRODUCTION PROGRAM

5. 3.1FARM CAPACITY
The market study of sisal yarn production presented above indicates that the
demand for sisal fiber sacks in 2018 is 10 million pieces. This figure will grow to
about 13.43 million pieces in 2026, and to about 14.37 million pieces in 2028.
Accordingly, the envisaged sisal plant producing will have annual capacity
corresponding to 7,484,850 sisal plant from 1496.91 hectare and within 18 months
the plan mature 16 harvestable leaf per plant within 4 harvesting cycle and a total of
119,757,600 per year. The farm will operate 8 hours a day, and 300 days a year.

. 5.3.2 FARM PRODUCTION PLAN

At the initial stage of production it is natural to come across situations like

inefficiency of operations, unexpected stoppages, possible short comings of sisal
plant production, etc. This would mean that time is required for skill development of
workers and adequate market penetration. Hence, it is more appropriate to start
operation at 75% of plant capacity in the first year, and 85 for the 2nd Year then
increase capacity utilization to 90% and 100% in the 3nd and 4thyear of plant
operation. Production build-up and capacity utilization is shown in Table 5.3.2

Table 5.3.2: Capacity and Production Plan

Production Year Y-1 Y-2 Y-3 Y-4-y10

Cultivated land ha 1496.91 1496.91 1496.91 1496.91
Plant per hector Plant/per ha 5,000 5,000 5,000 5,000
ha
Total plant Population No 7,484,529 7,484,529 7,484,529 7,484,529
Number of Cutting Extracted 16 17 18 19
leaf/4 cycle leave/plant
Total Extractable leaf number 119,752,464 125,740,087 132,027,092 138,628,446
Capacity utilization (%) 75 85 90 100

5.4 FARM CONSTURACTION OPERATIONS

5.4.1 PRE-OPERATING ACTIVITIES

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During the implementation period, the different activities likely to be undertaken
have been classified as follows on the basis of activities category and schedule in
tow to three year period as shown in the activity chart shown at table below.

Table 5.4.1: PRE-OPERATING ACTIVITIES

ACTIVITES years
1 2 3
Farm Development
Planting & Sisal plant material Production
Farm Building and Site Work Construction
Farm Machinery Purchase
Farm tools and auxiliary machinery Purchase
Manpower recruitment
Training to technical staff
Farm Inputs Purchase

5.4.2 LAND AND PLANT LAYOUT

The consideration take at fixing the area requirements are as follows,
 Keeping the path of the farming area as simple as possible.
 Laying out the grading and fresh packing facility, following the product
through the complete production cycle
 Avoid any situations where workers of each production units not to cross
paths each other’s, and keep the total distance that the products travel
through the factory to a minimum.
 The nursery equipment requirement and machinery size. Therefore the land
utilization plan and requirements are details as the following paragraph.

5.4.3 LAND DEVELOPMENT

The main production and process of sisal farm will be started with land development
activities, such as land clearing and surveying (for land parceling and access/ farm
road marking). The land development activities are expected to be undertaken by

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 machinery and equipment such as Bulldozers, and surveying instruments. These
machinery and equipment are expected to be rented from other enterprises.

5.4.4 LAND PREPARATION

Generally, land development for sisal fiber production is followed by land

preparation. It comprises plugging and harrowing. Plugging operation may be omitted
after the first year operation and be replaced by minimum or no tillage practices.
Planting follows harrowing with fertilizer application. For this purpose, tractors with
various bottoms like disc plough, disc harrows and planters and fertilizer drillers are
employed in general.

Land preparation for sisal is similar to that of simple farming crops like sisal. They
can be achieved by one plugging, disking and harrowing. The sowing time varies
from place to place. The best time for sowing in tropical and subtropical regions is
just after the rains are well started, i.e. from the end of May to early July. The crops
should always be sown in rows.

Table 5.4.4: PRODUCTION SCHEDULES OF THE PROJECT

Sr. No Year 1 Year 2 Year 3

Major Activities (ha) (ha) (ha)
1 Plugging operation 1496.91

2 Planting 1496.91

3 Field Managing 1496.91

4 De-suckering and harvest - 1496.91 1496.91

5 Harvesting - 1496.91 1496.91

6 Processing of sisal fibre - 1496.91 1496.91

7 Commencing Production - 1496.91 1496.91

5.4.5 LAND UTILIZATION PLAN

The total area of Farm land required for the project is 1500 ha. From this the activated or
crops cover area is 1496.91 ha, while the total farm including staff and recreation area

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built-up area is and plant processing facility and including staff and recreation area
built-up area is 3.09 ha. This includes production hall, finished products and raw
materials stores, offices and social facilities. The total cost of buildings and civil work at
a unit cost of land, is estimated at Birr 97,500.00. According to the Federal Legislation
on the Lease Holding of Urban Land (Proclamation No 721/2004) in principle, urban land
permit by lease is on auction or negotiation basis, however, the time and condition of
applying the proclamation shall be determined by the concerned regional government
which depending on the level of lease development policy. For this envisaged project
considered 25 years lease period agreement according to SNNPR rural land investment
policy of agriculture investment and its cost is estimated 65 birr per hectare of land. In
Ethiopia the lease period ranges from 25, 30, 70 and 99 years for various type of
investment while the lease payment period ranges from 10 years to 60 years based on
the type of investment

Table 5.4.5 Land Investment Estimated Cost (Et.Birr)

Unit Price Total cost

Land Utilization Plan unit Qt
ET.Birr/M2 ET.Birr
Total Project Area Ha 1500
65 97,500.00
Cultivable Area Ha 1496.91

Farm Facility Area 0.15

Processing and Facility Area Ha 1.394
Road, Access, Boundary and
Ha 0.200
Others
Tree and Shade Planting
Ha 1.000
Area to protect Environment
Staff Camp Farm Recreation
ha 0.350
and Work shop Area
Sub-total ha 3.09
Total Farm Area 1500
97,500.00

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5.4.6 FARM BUILDING AND CIVIL WORKS
The total land required for the project is estimated to be 1500 M2, and for a period of
2
project years. Of the total land area, 1500 m will be covered by different types of
buildings. Office building will have walls made of hollow – block linings and properly
cement plastered. The production and storage hangars will have walls covered by
corrugated iron sheets on columns and beams made of metallic bars. The roofs will
be of saw –tooth type with metallic trusses and covered with metal cladding. Other
buildings will be built by hollow-block walls properly finished, but mot cement
plastered. Based on the above building construction, average unit price of Birr 2540
(per m2) is proposed. The cost estimated of Building structure cost is 3,275,000 Birr.
The details breakdown and others details on floor area shown at the supporting plan
and bill of quantities.

Description of Work Unit Qty Cost (Et. Birr)

Plant Area M2 500 2,000 1,000,000
Products Storre M2 250 2,500 625,000
Garage - open Plot Area M2 125 2,500 312,500
Laboratory M2 250 2,500 625,000
Office M2 250 2,500 625,000
Water tank M2 125 700 87,500
Total 1500 12,700 3,275,000
Average 2540 3,275,000

5.5 MATERIALS AND INPUTS

5.5.1 FARM PLANTING MATERIALS REQUIREMENT

The platelet purchased initially from the research institution and improve seeds
from seed supply company will be planted in the field nursery for an average
period of 18 months for sisal before transformation to the farm. The cost of nursery
and purchase of high value seed from purchasing to becoming ready for
transplanting is birr 22,453,587 at full production capacity

Page 37 of 83
Table: 5.5.1 Establishment of Sisal Farm Seedling and Cost

No Description Qty Cost (‘000 Birr)

LC FC TC
1 For Establishment of Sisal Farm
Sisal seedling in Number 7,484,529 22,453,587 22,453,587

5.5.2 Nursery Establishment and FARMING COST

Seedlings should be farmed at 10 – 15 cm in depth. About 5 tone FYM or cow dung
is to be added to the soil. Farming may be done in single or double row following
triangular or rectangular system. Sisal plant may be farmed using mulch as soil
cover. This ensures total weed control and heavy crop. However, fertilizers may be
applied by spraying or drip method farming cost is estimated at birr 11,875,715.78.
Table 5.5.2: Land preparation and Planting Cos t (ET. Birr)
Materials unit QT unit Price Total Cost in Birr
Total Seed Requirement Cost - - - -
SEEDLLING MULTIPLICATION COST
Nursery seedling planting 200 200 40,000
Phosphors 200MD/ha 30 9 270
Nitrogen kg/ha 60 7 420
Potassium kg/ha 30 5 150
FYM kg/ha 2,000 200 400,000

Page 38 of 83
 Nursery, Management Qt/ha 200 30 6,000
Sub-Total 446,840.00
LAND PREPARATION AND PLANTING COST
Pre-plant fertilizer -Nitrogen kg/ha 44,907 7 314,350
Phosphorus kg/ha 89,814 9 808,329
Potassium kg/ha 44,907 5 224,536
Insecticide Lt/ha 4,491 5 22,454
Sub-Preparation & Planting Cost 1,369,669
LABOR
Land preparation, digging Man days/ha 89,814 30 2,694,430
Application of manures & fertilizers Man days/ha 44,907 30 1,347,215
Planting Man days/ha 67,361 30 2,020,823
Spraying of pesticides and others Man days/ha 14,969 30 449,072
Sub-Prepr &Plant Labour Cost 6,511,540
Farm MACHINERY AND ASSOCIATED COST
Machinery, Fuel, Lt/ha 158,496 17 2,694,430
Oil and Lubricants 2,694,430 15% 404,165
Labor with machinery Man days/ha 14,969 30 449,072
Total MACHINERY AND ASSOCIATED COST 3,547,667
Total Cost 11,875,715.78

5.5.3 ANNUAL PLANTING PLAN OF THE PROJECT

Tomato and onion farm plating time is restricted to wormer times of the year and in
early rainy seasons. The envisaged farm due to availability some warmers months
the year and irrigation water, farming can be done warm months of the year. The
climatic conditions of the farm site will enable the farm to market its product almost
year-round marketing.
Table 5.5.3 FARM ANNUAL PLANTING PLAN
SISAL FARM ANNUAL PLANTING PLAN
unit Y1 Y2 Y3 Y4-Y10
TOTAL FARMING AREA Ha 1,496.91 1,496.91 1,496.91 1,496.91
Farm Utilization % 75% 85% 90% 100%
Capacity

Page 39 of 83
 5.6 CROP MAINTENANCE

5.6.1 APPLYING MANURES AND FERTILIZERS

Sisal plant requires abundant supply of Nitrogen and Potash. Manu ring should be
done in 2 - 3 equal doses every year, once at the onset of monsoon (May-June) and
again at the end of the rainy season after the sisal plant is harvested. The fertilizer
dose was estimated in this feasibility by conventional farm fertilizers requirements to
be conservative by taking the highest expenses but would be replaced by equivalent
compost and other organic farm recommendations at the operation time of the farm.
The fertilizers doses recommended for obtaining higher yield are 30kgN, 60kgP2O5
and 30kg K2O per ha per year in addition to 2000 kg FYM. Fertilization is followed
by earthling up around the ridge. However, nitrogen fertilizer must be stopped about
two months before flower induction. Estimated cost shown below table 5.6.1.
Table 5.6.1 FARM MAINTENANCE COST ESTIMATIONS (ET.Birr)

INPUTS unit QT unit Price Total Cost

in Birr in Birr
FYM Qt/ha 299,381 200 59,876,232
Urea ( N ) Kg/ha 44,907 7 314,350
DAP ( P2O5 ) kg/ha 89,814 9 808,329
Potassium kg/ha 44,907 5 224,536
Insecticide 374,226 5 1,871,132
Total Planting Fertilizers Cost 63,094,579
MAINTENANCE COST OF FARM
INPUTS
FYM kg/ha 38,732 200 7,746,488
Urea ( N ) kg/ha 449,072 7 3,143,502
DAP ( P2O5 ) Lt/ha 69,856 9 628,700
Potassium Lt/ha 958,020 5 4,790,099
Insecticide Lt/ha 4,191 250 1,047,834
Total Maintance Input Cost 17,356,623
LABOR man days
/ha
Land preparation, digging man days 40,000 30 1,200,000
/ha
planting man days 172,144 45 7,746,488
/ha
Application of manures &fertilizers man days 89,814 35 3,143,502

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 /ha
Spraying of pesticides, man days 17,963 35 628,700
/ha
Weeding x 2 times man days 119,752 40 4,790,099
/ha
Earthling up man days 34,928 30 1,047,834
/ha
Harvesting man days 14,969 45 673,608
/ha
Total Farm Lab.Cost Brirr/year 19,230,230
Total Farm Cost Brirr/year 99,681,433

5.6.2 WEED CONTROL AND MULCHING

Black polyethylene approximately 90 cm wide is recommended solutions as mulch in
commercial farming of vegetable farming. As the mulch is rolled out on the farming
bed, its edges are covered with soil. Farming holes are punched through the mulch
with a trowel. When nematicides are injected into the soil, crop mulch makes them
more effective by slowing their dissipation. The polyethylene mulching,
 increases soil temperature in the root zone,
 helps to conserve soil moisture,
 promotes rooting by concentrating moisture in the root zone,
 And controls weeds. Weeding should be done at least 3 to 4 times a year.
Manual weeding is recommend for such organic farming operations

5.6.3 FARM PROTECTION

No serious pest or disease of sisal is p plantrevalent in Ethiopia. They can be
controlled by dipping the basal portion of the farming material from 0.02 to 0.05 %
methyl parathion as a prophylactic measure. Application of carbofuran at15 to 17 kg
per ha in affected formation can effectively control the pest.

5.7 HARVESTING

5.7.1 HARVESTING OPERATIONS

First cutting, in general, starts at 3 ½ years crop age. However, in intensive
cultivation programme with appropriate care, first harvest can start at 2 ½ years of
age also. At first cutting 16 leaves and in each subsequent cutting 12 leaves are left

Page 41 of 83
 on the plant. Harvesting during November to February is advised considering
several factors like comparatively lower temperature, minimum rain hindrance,
restricted active growth and economy in harvesting and extraction operation. After
cutting, the leaves are bundled (say 50 numbers) and the bundles are transported
to the extraction unit. Extraction of fiber is done on the same day or preferably next
day as early as possible.

5.7.2 FARM YIELD AND YIELD ESTEMATION

The yield from a farm population of 119,752,464, 125,740,087, 132,027,092 and
138,628,446 number of leave from 1496-91 ha is for the first, second, third and
fourth to tenth year respectively. About 70% of the total yield will be for the farm
industry the reaming balance will be used for local market. Taking into consideration
after harvest yield loss 20-30% reported by similar horticulture farms case yield
reduction

Production Year Y-1 Y-2 Y-3 Y-4

Cultivated land ha 1496.91 1496.91 1496.91 1496.91
Plant per hector Seedling/ha ha 5,000 5,000 5,000 5,000
Total plant 7,484,529 7,484,529 7,484,529 7,484,529
Population No
Number of Cutting Extracted 16 17 18 19
leaf/4 cycle leave/plant
Total Extractable leaf number 119,752,464 125,740,087 132,027,092 138,628,446

5.8 FARM MACHINERY AND VEHICLES

Farm required different vehicles for the different purpose. Tractor and is accessories
required for the farm farming purpose, whiniest, a loading vehicle would be required
for providing services for transportation of raw material(s), small amount of inputs,
facilitating farm programmed, transporting locale raw materials from far places other
than, conducting marketing activates, transporting product sales to various market,
mobilizing casual laborers and other work, Insulated Vegetable Transport FSR- Truck
for product sales and Tractor and Services bus and Double Cap (4WD) For this
purpose a transportation vehicle has been proposed which will cost around Et.Birr

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2,200,000 without tax purchase for local suppliers , the cost breaks down as show
at Table 5.8 below,
TABLE 5.8 MOTOR TRUCK REQUIREMENTS
VEHICLES AND Farm Machinery
equipment Capacity Unit Qt. Rate
Birr
Tractors 110 HP No 1 1,200,000
Trailer Disk harrow ,( 28 Disc), Disc plough ( 5
No set 200,000
Disc),Ripper - Ridger
Double Cap (4WD) 5 person No 1 800,000
2,200,000

5.9 NURSERY EQUIPMENT COST

A total of 84,960 ET Birr is required for purchase of farm tools and Accessories and
related equipment. The following table gives an assumed breakup

Table 5.9 Farm Tools and Accessories

Farm Nuressary Tools and Accessories(Birr)
Description of Work Specification Unit Qty Rat Total Cost
Wheel barrow No 50 300 15000
Shovel No 100 35 3500
Sickle No 60 40 2400
Fork No 79 40 3160
Axe No 20 300 6000
Manual Knap Sack 20Lt No 4 500 2000
Weighing Scale No 2 5000 10000
Rack No 100 80 8000
Hoe 60 65 3900
others 31000
Grand total 84960

Page 43 of 83
 6. PROCESSING TECHNOLOGY AND ENGINEERING

6.1 SISAL SACK PRODUCTION AND PROCESSING

6.1.1 INDUTRY CAPACITY AND PRODUCTION PROGRAM

6. 1.1.1 INDUSTRY CAPACITY
The market study of sisal yarn production presented above indicates that the
demand for sisal fiber sacks in 2017 is 10 million pieces. This figure will grow to
about 10.8 million pieces in 2018 and to about 14 million pieces in 2028.
Accordingly, the envisaged sisal yarn producing plant will have annual capacity
corresponding to 7 million pieces of sisal fiber sack at initial stage and it increased 9
million sisal sack packaging produce at full capacity year fourth year. The average
weight of one sisal fiber sack is in the order of 1 kilogram. Consequently, the
envisaged sisal processing plant/industry will have annual production capacity of
2000 tons. The plant will operate single shift 8 hours a day, and 300 days per year.

6. 1.1.2 INDUSTRY PRODUCTION PROGRAMME

At the initial stage of production it is natural to come across situations like
inefficiency of operations, unexpected stoppages, possible short comings of sisal fiber
supply, etc. This would mean that time is required for skill development of workers
and adequate market penetration. Hence, it is more appropriate to start operation at
75% of plant capacity in the first year, and then increase capacity utilization to 85%,
90% and 100% in the 2nd and 3rd and 4th year of plant operation. Production build-up
and capacity utilization is shown in table 6.1.1.2

Table 6.1.1.2: Capacity and Production Plan

Year y1 y2 Y3 4 –y10
Sisal Sack( Million In pieces) 7,479,185 8,865,46 9,308,737 9,774,174
4
Capacity utilization (%) 75 85 90 100

Page 44 of 83
 COFFEE PACKAGING SISAL BAGS

6.1.2: SISAL FIBER EXIRACTION AND PROCESSING

Harvest maturity: Harvesting under normal conditions the plant may be
harvested for the first time in 3 to 4 years after establishment. At this stage, the
plant already has 120 to 125 leaves that are 100 cm or more in length and is about
1.5 meter high. Only ripe leaves must be harvested. It is ripe as soon as the colour of
the thorn at the tip changes from dark brown to a light brown colour. Sisal leaves are
harvested at regular intervals during the4 harvesting cycle of the crop, thereafter
only 16-25 leaves per year can be harvested. An early start of cutting is conducive
to better yields, provided the plants are not cut too severely. If cutting is delayed,
plants pole earlier and heavy leaf losses occur through withering. Severity of cutting
has a marked influence on yield and overcutting should be avoided. Where the field
is uneven, selective cutting should be done to avoid cutting immature plants. Cutting
too soon reduces the length of the subsequent leaves grown on the plants; and the
length of the leaves is of paramount importance as the fiber content increases as the
leaves grow longer.

DECORTICATORS: Fiber is extracted from the harvested leaves by using

decorticators. Leaves should be decorticated not later than 48 hours after cutting.
Two types of decorticators are used. These are one drummed and single feeder

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decorticators which are run by 250HP diesel engines. AC operated motors can also
be used in place of diesel engine. Leaves are fed into the machine mouth by one
person. A distinctive feature of this type of raspador is that the leaves enter the
machine endwise to make rasping action gradually. On entering, the knives/blades
progressively smash and tear off the leaf tissues at closely and regular spaced
blades. The fiber portion of the leaf remains in the hand of the operator. The average
output of these decorticators is 100 kg wet fiber/day. With some modifications,
these decorticators have been converted to two men fed decorticators (double fed).
The fiber output is nearly double as compared to the one man fed decorticators.
Automatic fiber decorticators consist of two covered drums placed at opposite
sides of a central line along which the leaves are conveyed and the fiber is delivered
after decortications. In this process the leaves enter cross wise instead of end wise
and decortications take place in one fell swoop. All the leaf tissues are crushed and
scraped off the fibers almost simultaneously because feeding of leaves can be done
at much faster rate. Such decorticator can extract 25,000 leaves or 10 tones
leaves by weight/hour. During decortications 15 to 20% of the total leaf fiber is
lost.

6.1.3 PROCESSIG OF THE FIBRES

Retting: After decortications the fiber is washed in water and then spread in thin
layer on ropes or iron wires till it is adequately dry. There after the fiber is beaten
with wooden round poles to remove foreign cells/materials which remain attached
with fiber during extraction process.

Drying: After decortication and washing, the fiber is dried, either in the sun or in
drying machines and this gives the fiber a more uniform quality. Excessive drying in
the sun may lead to deterioration in colour. Usually the dried fiber shows slight
greenness in colour. To make fiber white, next day this greenish fiber is spread
under the direct sunlight on the cement or grass floor. The green colour bleached
quickly to whiteness in presence of moisture; hence, water is sprinkled over fiber to
accelerate the bleaching process. On completion of drying, fiber is collected in small
bundles and then baled for transportation and marketing. The dried fiber represents

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only 4% of the total weight of the leaf. This process also combs out the shorter fiber
strands/strings of 7.5 to 12.5 cm in length.

Brushing: After the fiber has dried, it is collected into hanks to be brushed. The
brushing process is necessary to straighten the tangled, wavy fibers and to polish
them. The fire is mechanically combed.

Grading: After brushing, the fiber is graded according to length, colour and
other/decortications characteristics. The buyers insist on correct grading and general
neatness of the bale. The presence of oil, bits of coal and other impurities in the bale
is strongly disapproved.

Length/Class Description
3L At least 915 mm, without knots and cream to a light straw colour.
3 At least 610 mm.
UG Darker colour fiber.
PM Shorter than 610 mm with knots and darker colours.

6.1.4 SACK PRODUCTION AND PROCESSING

The process of manufacturing sisal yarn consists of the following unit operations
Jute Sack Weaving: Weaving is a process of interlacement of two series of threads
called "wrap" and "weft" yarns to produce the fabric of desired quality. There are
separate looms for hessian and sacking in weaving section. The Hessian looms,
shuttle which contents cops (weft yarn) is manually changed. The sacking looms are
equipped with eco-loader to load a cop automatically into the shuttle

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Damping: cloth is unrolled and water is sprinkled on it continuously to provide
desired moisture. Each roll is generally104 yards or 95.976 meters. Damping is
done manually.
Calendaring: Calendaring is a type of processing similar to ironing of the fabric.
After damping the damped fabric passes through pairs of heavy rollers rendering
threads in fabric flattened and improve the quality and appearance.
Lapping: Lapping is the process in which Hessian fabrics are folded into the
required size used in "Bale press" operation on the lapping machine.

Cutting : Cutting is the process where the sacking cloth is cut to the required length
for making bags for different size such as A-Twill bags and B-twill bags of 100 kg
capacity.
Hemming: In Hemming process, the raw edges of sacking cloth cut pieces are
shown by folding it with sewing machine

6.2 MATERIALS AND INPUTS

6.2.1 MATERIALS
The basic raw material required by the sisal yarn producing plant is sisal fiber. Sisal
fibre is obtained from sisal plant that can grow in SNNPRS, particularly in the
surrounding areas of Guraferda. It is therefore expected that sisal fiber producing
plant will be established to supply the envisaged plant with sisal fiber. These
studies highly propose that investment on sisal plantation will have to be
encouraged in the region. Moreover, individual farmers will have to be encouraged
and incentive system be devised so that there will be enough raw material for sisal
fiber and sisal sack production. The annual requirement of sisal fiber and related
cost is shown in Table 6.2.1 below. Other miscellaneous inputs are also required in
the process of sisal yarn production.

Page 48 of 83
 Table: 6.2.1 Annual Requirement for Raw Materials and auxiliary

No Description Qty Cost (‘000 Birr)

LC FC TC
1 Raw sisal fiber (ton) 15,696,173 46,981,742 46,981,742
2 Miscellaneous inputs (Emulsifying Req 328488 - 328488
agent, mineral oil, water) – Emulsion
Total 47,310,230 - 47,310,230

6.3 UTILITIES
Electricity and water are utilities required for the plant. A total of 240,000 kWh of
electricity is required. Annual water consumption is estimated to be 10,000 m3. At
the rate of Birr 0.474 per kWh and Birr 10 per m3 for water, the total annual
expenditure on utilities will be Birr 213760

6.4 MACHINERY AND EQUIPMENT

6.4.1 SISAL FIBER EXTRACTION MACHINERY AND EQUIPMENT

Machinery and equipment required for sisal fiber and rolled rope manufacturing
plant are given in Table 6.4 .1.

TABLE 6.4.1: LIST OF SISAL FIBER EXTRACTION MACHINE AND EQUIPMENT

Sisal Fiber Extraction machine

Description Cap./Unit Unit Rate Price
Extraction machine USD USD
Blending and opening machine 1 3,000 3,000
Carding machine 1 1,000 1,000
Drawing machine 1 2,500 2,500
Fork lift trucks 1 30,000 30,000
Sub-total 36,500
Rope Making Machine
Roving machine kg/hr 1 7,000 7,000
Spinning machine kg/hr 1 5,000 5,000
Sub-total 12,000
Marketing Unit Machine
250
Winding machine 1 3,000 3,000
Kg/hr
Weighing Scales Set 1 500 500

Page 49 of 83
 Trolleys for moving bales, yarn
Set 1 10,000 10,000
packages, beams, etc
250
Packing machine 1 5,000 5,000
Kg/hr
Sub-total 18,500
Auxiliary Machinery
Generate 30 kva 1 5,000 5,000
Water Pump 2 700 1,400
Lab Equipment 1 5,000 5,000
Welding shop equipment set 1 30,000 30,000
Engineering w/s equipment set 1 5,000 5,000
Sub-total 46,400
Total FOB Price at port of Origin (USD) 113,400

Grand Total ( 1+2+3+4) *27.27in Birr 3,092,418

Estimated ocean fright (7%of FOB) 190,512
Estimated insurance (5% of FOB) 136,080
Estimated Inland Transport (2% of
54,432
FOB)
TOTAL MACHINERIES AND
3,102,624
EQUIPMENT COST

6.4.2 SACK PROCESSING MACHINERY AND EQUIPMENT

Machinery and equipment required for sisal fiber and rolled rope manufacturing
plant are given in Table 6.4 .2.

TABLE 6.4,2: LIST OF SACK PRODUCTION MACHINERY & EQUIPMENT

Sack Production Machinery & equipment

Description Cap./Unit Unit Rate Price

Extraction machine USD USD
Blending and opening machine 1 $3,000.00 $3,000.00
Carding machine 1 $4,000.00 $4,000.00
Drawing machine 1 $4,500.00 $4,500.00
Fork lift trucks 1 $ $30,000.00
30,000.00

Sub-Total $41,500.00
Rope Making Machine

Page 50 of 83
Roving machine kg/hr 1 $7,000.00 $7,000.00
Spinning machine kg/hr 1 $8,000.00 $8,000.00
Sub-Total $15,000.00
Marketing Unit Machine]
Winding machine 250 Kg/hr 1 $6,000.00
$6,000.00
Weighing Scales Set 1 $700.00 $700.00
Trolleys for moving bales, yarn Set 1 $12,000.00
packages, beams, etc $12,000.00
Packing machine 250 Kg/hr 1 $5,000.00
$5,000.00
$23,700.00
Total FOB Price at port of Origin (USD) $80,200.00
Grand Total ( 1+2+3+4) in Birr 2,187,054.00
Estimated ocean fright (7%of FOB) 153,093.78
Estimated insurance (5% of FOB) 109,352.70
Estimated Inland Transport (2% of FOB) 43,741.08
TOTAL MACHINERIES AND EQUIPMENT COST 2,493,241.56

6.5 SOURCE OF TECHNOLOGY

Address of Machinery Supplier is given below: Shanghai Small Enterprises Trade
Development Service Centre, International Cooperation Division, Shanghai 200032,
and Fax: (008621) 642201814

6.6 LAND, BUILDING AND CIVIL WORKS FOR INDUSTRY

The total land required for the project is estimated from the farm land 1.3942 ha,
similar land lease rate of Birr 65 per ha per year, and for a period of 25 years. The
total industry land area, 1.3942 ha will be covered by different types of buildings.
Office building will have walls made of hollow – block linings and properly cement
plastered. The production and storage hangars will have walls covered by
corrugated iron sheets on columns and beams made of metallic bars. The roofs will
be of saw –tooth type with metallic trusses and covered with metal cladding. Other
buildings will be built by hollow-block walls properly finished, but mot cement
plastered. Thus, the total cost of building will be Birr 5.7 million. The details

Page 51 of 83
breakdown and others details on floor area shown at the supporting plan and bill of
quantities.

Processing Hall and Other Building Facility Cost

Unit
Description of Work Unit Qty Cost Cost (Et. Birr)
SISAL PROCESSING FACILITY
PRE-PROCESSING M2
Raw Materials Receiving Shade M2 1000 1000 1000000
Pre-cleaning and Grading Shade M2 1000 1000 1000000
Sub-Total 2000 2000000
PROCESSING ROOMS
Sisal Washing shade M2 200 1400 280000
Sisal Extraction Processing Room M2 240 2200 528000
Sisal Fiber washing room M2 108 2200 237600
Sisal Sack Processing Room M2 500 2200 1100000
Sack Packing Room M2 150 2200 330000
Sub-Total M2 1198 2475600
STORGE Room
Raw Materials Store M2 120 2300 276000
Packaging and Lab lining Room M2 120 2300 276000
Finished Product Store M2 120 2300 276000
Sub-Total M2 360 828000
ADMINE AND SALES Buliding
Laboratory and Quality Control room M2 20 2300 46000
Labor Facility Room and Toilet M2 72 2000 144000
Small office M2 72 2000 144000
Sub-Total M2 164 334000
OTHERS
Water Reservoirs Area M2 100 576 57600
Waste and Water Area M2 120 576 69120
Sub-Total M2 220 126720
Total Processing Area M2 3942 5,764,320
Sisal Fiber Drying Open Area ha 1
Total Sack Production Area 1.3942 5,764,320

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 6.7 PODUCTS AND REVENUE
Production Year Y-1 Y-2 Y-3 Y-4
Revenue
Sack Production Unit 7,479,185 8,865,464 9,308,737 9,774,174
Price (birr/pieces) 37 37.00 37.00 37.00

Revenue 276,729,845 328,022,155 344,423,262 361,644,425

Total revenue Revenue 276,730 328,022 344,423 361,644
Revenue 276,730 328,022 344,423 361,644
Expense 241,201 265,122 279,590 296,132
87% 81% 81% 82%

6.8 TOTAL PRODUCTION COSTS OF THE JUTE BAGS

Production costs is not include the investment costs, but it includes the raw material,
Auxiliary material, utilities( electric city and water consumption, transport cost for
raw material and marketing cost of fuel), Salary and wage for Production Staffs
(direct labour), and factory overheads. There are different method of estimated the
production cost, the complication arises from the fact that, since it is the company
produce only one item for sale the consultant estimated the production cost by
following the sum of total operation were derived by the total volume of production.
Therefore, the total production volume of the project was 9,774,174 pieces of jute
bags and the total operation cost of the project 39.19 million birr per annum at 100%
production capacity. In order to forecasting unit price cost of the production total
operation were derived by the total volume of production i.e. 296,132,000 birr /by
9,774,174 pieces of jute bags is equal to 30 birr per pieces of jute bags without profit
margin and the cost of price increased by 5% of rate through the project life. For more
detailed information show below table 6.8.

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 Table 6.8: Estimation of Total production cost of the Jute bags Processing

Production Yare Y-1 Y-2 Y-3 Y-4-y11

7,479,185 8,865,464 9,308,737 9,774,174
Total Production volume(in pieces)
PLANT VARIABLE OPERATING COST
Farm Management Cost 155,461 161,531 161,618 161,709

Sisal Extraction Cost 38,568 47,280 54,577 63,003

Sack Production Processing Cost 22,577 29,403 33,945 39,190

Casual Labor at preparation line 240 265 291 306

Salary and Wage Production Staffs) 874 918 964 1,012

Utilities 95 95 95 95

Transport Cost 932 932 932 932

241,201 265,122 279,590 296,132

Total Production Cost(000 birr)

6.9 MAINTENANCE & REPAIRS

Spare parts for machinery and equipment of major farm production lines and
auxiliaries systems will be procured and stored. It is planned to hold a spare part for
one production year. A total of price of ETB 170,402.86 is allocated for the purchase
of spare parts. Maintenance costs are estimated at a level to adequately maintain
machinery and equipment in good working order over the project’s life.
Description Parameter (%) Investment cost (Birr) Repair and maintenance
(Birr/Year)
Civil works & Buildings 0.50% 9,039,320.00 45,197

Machinery & equipment 1.00% 5,680,825.56 56,808

Furniture & Fixture 2.00% 119,900.00 2,398

Motor Vehicles 3.00% 2,200,000.00 66,000

Total 170,402.86

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6.10 OFFICE FURNITURE & EQUIPMENT
A total of ETB 119,900 is required for purchase of office furniture and related
equipment. The following table gives an assumed breakup.

Furniture & Fixture

Description of Work Unit Qty Cost ( ETB)
Plant manager office
Executive Table Pcs 1 5000 5,000.00
Swivel Chair Pcs 2 1700 3,400.00
Chair normal Pcs 7 1200 8,400.00
Guest chair Pcs 7 700 4,900.00
Computer Table Pcs 1 1200 1,200.00
Filing Cabinet Pcs 1 5,000 5,000.00
Normal table Pcs 5 3000 15,000.00
Shelf with locker Pcs 2 3500 7,000.00
Shelf ( 2 x 2) Pcs 4 4000 16,000.00
Table with sink and Drawer Pcs 2 5000 10,000.00
Computer with printer Set 2 22000 44,000.00
Sub Total 119,900

6.11 INDUSTRY OPERATING ACTIVITIES

6.11.1 PRE-OPERATING ACTIVITIES

During the implementation period, the different activities likely to be undertaken

have been classified as follows on the basis of activities category and schedule in 2
years period as shown in the activity chart shown at table below.

Table 6.11.1: PRE-OPERATING ACTIVITIES

ACTIVITES years
Operation years 1 2
Building and Site Work Construction
Processing Machinery Purchase

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 Processing auxiliary machinery Purchase
Manpower recruitment
Training to technical staff

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7. ENVIRONMENTAL IMPACT ASSESSMENT
This project is designed to cultivate and promote the production of high value sisal
plant for fiber production, by maintaining the existing environmental system. It also
intends to protect the environment from the possible risks. Thus, in order to establish
environmental friendly farming, the new project site has been thoroughly scrutinized
particularly for its soil character, vegetation cover and agro ecology to identify the
expected negative impacts of the development.

The major expected threats identified due to the overall development farming
activities are soil depletion and loss of plantation cover in some undulated land form
areas. Therefore, the environmental management plan that will be realized by the
company is using soil improving crops through intercropping planting system. In
addition buffer plantation tree are going to be planted in order to protect from soil
erosion and minimize the misbalance effect of agro ecology.

In addition to cropping system and tree plantation programs, soil improving and
conservation practices as well as adopting good farming management activities will
be practiced including planting of cover crops, drainage structure and terrace
making. Furthermore the project will apply integrated pest management which is
more environmentally friendly form of pest control than the traditional pesticides as
its goal is to reduce pesticide use to a minimum by using a variety of less impact
means with pesticides only as a last choice

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8. PROJECT ORGANIZATION AND MANPOWER REQUIREMENT

8.1 FORM OF BUSINESS

The business will is categorized Large Scale Commercial Agro Processing Farm
Industry and is registered under the name “ Yesiget Manufacturing Sisal
Development Farm and Jute Bag Processing PLC”

8.2 ORGANIZATIONAL STRUCTURE OF THE FARM

After a thorough assessment of the organizational structures of the existing similar
commercial sisal production and sack production processing with their past
performance and the advice given by the selected expertise, machine supplier, the
consultant has proposed the following organizational structure. Accordingly, the
recommended organizational structure to be created within the envisaged processing
plant for the smooth running of the operations may be divided into the following
departments and office such as plan processing production Department and Manger
Office, Finance and Administration Department. In this context, the organization bloc
diagram is shown in figure 8.2 and the role of each section is described as follows.

Figure 8.2 Organizational Stricture

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8.3 MAN POWER REQUIREMENT
The plant works will demand a total of nine perm ant employs as per the skill,
qualifications, and budget details at the table below
Table: 8.3 Man Power requirements
Monthly Annual
No. Title/Designation Educational level Req.
Salary Wages
No.
A. Administration
BSC in Mechanical Engendering
Plant manager 1 8000 96000
Experience 8 years
Secretarial science Experience 5
Secretary 2 6000 144000
years
BSC in Accounting Experience 5
Accountant 1 3000 36000
years
BSC in Accounting Experience 5
Personnel officer 1 1000 12000
years
BSC in Accounting Experience 4
Salesman 1 1000 12000
years
BSC in Accounting Experience 3
Purchaser 1 3000 36000
years
BSC in supply management
Store man 1 2000 24000
Experience 3 years
BSC in Accounting Experience 2
Cashier 2 1500 36000
years
Clerk Experience 6 1500 108000
General services Experience 1 2500 30000
Sub-total 17 534000
B. Production
Production BSC in Accounting Experience 3
2 1000 24000
supervisor years
BSC in Accounting Experience 3
Shift foreman 34 700 285600
years
Operators Out mechanic 10 350 42000
Laborer Reading writing 4 3000 144000
Mechanics Out mechanic 4 1500 72000
Electricians Electrician 2 1500 36000
Drivers 3rd license 2 1500 36000
Sub-total 0 - 639600
Workers’ benefit (25% BS) 0 - 234720
Total 75 - 1408320

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8.4 TRAINING REQUIREMENT
The skill of Agronomy and Agro-processing is well developed in the country since
there is a plant engaged in sisal fiber production and processing and production.
However, machinery operators will have to be given training for two weeks in
Ethiopian with cooperation Ethiopia agricultural research Institution. A total of ETB
200,000 is allotted to train plant operators and technicians

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9. FINANCIAL APPRAISAL OF THE PROJECT

9.1 INTRODUCTION
The demand for sisal sack is increasing rapidly in national markets and a big gap exists
between supply and demand. There is need to take advantage of this situation by
encouraging its production which is a highly viable venture as brought out below for
“Yesiget Manufacturing Sisal Development Farm and Jute Bag Processing PLC”
putting hands in commercial cultivation of agriculture crops in the country. Farm movement
in to large scale production of sisal sack would give fast returns to them and will contribute
in the wealth of nation.

With the imbalance between supply and demand in the national sisal sack market
coupled with a low level of commercial sisal sack prices, there is much interest among
private operators to invest in sisal sack farm in Ethiopia. The sisal plant cultivation
and sack processing is a necessary investment to produce a quality sack packaging,
which is sold in the sack local market at medium prices. This chapter will assess the
financial feasibility of investing in oyster mushroom processing and marketing, using
the “Bench Maji Zone Bifitu Sisal Development Farm and Manufacturing
Industry PLC” establishment as feasibility studies. Detailed information regarding
economics of the project is provided as follows

9.2 FINACIAL APPRISAL OF INVESTING IN SISAL SACK PROCESSING AND

MARKETING

9.2.1 OBJECTIVES
The purpose of this section is to find what should have been the profitability of the
project if major investments and operation costs were paid by them. The results of
the analysis may therefore be a useful guide for project implementation and weather
it is feasible or not the analysis will:
i. Estimate the expected after-tax cash flows from the investment over a
time frame of ten years. The time frame of ten years was chosen because
it was difficult to predict what the sisal fiber and sack market, a thin
market, will look like in the long run.

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 ii. Compute the net present value and the internal rate of return.
iii. Propose a hypothetical model sisal sack is sales pricing related to world
price base analysis.
iv. Carry out sensitivity analysis to identify the impact of change of key
parameters on profitability.

9.2.2 DATA DESCRIPTION AND ASSUMPTIONS

Data for this section are based on primary data collected in 2010. In addition,
secondary information was gathered from the local and import sisal sack production
and marketing senior’s and private jute bags presser’s records.
i. BASIS AND PRESUMPTIONS
This project is based on single shift and 300 working days in a year with 3
cropping life cycle (one cropping life cycle is 35 days).
To run the unit viably throughout the year, the other sisal sack can be
produced and processed with the same machinery and equipment’s
whenever sisal sack is not available.
The yield of sisal sack has been considered as 90% based on sack bags.
The reaming 10% of production sisal mat has been taken as different
products.
The cost of machinery and equipment’s/materials indicated refers to a
particular make and the prices are approximate to those prevailing at the
time of preparation of this profile
The cost of packing, forwarding, tax, etc., is taken not more than @10% of
the cost of machinery and equipment’s.
The cost of installation and electrification is taken @ 0.05% of the cost of
machinery and equipment’s.
The price of sisal sack is taken 37 birr/kg at the project industry begging
period.
Non-refundable deposits-project cost, trial production, etc., are considered
under pre- operative expenses.
Interest on total capital investment has been taken @ 12% per annum.

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 Minimum 30% of the total investment is required as margin money.
Pay-back period of the project will be 5 years with yearly installments.
Break-even Point has been calculated on the full capacity utilization.
For smooth functioning of the unit, it is suggested that unit should have
own arrangements for cultivation of sisal sack for consistency and regular
availability of quality raw materials.
Sisal seedling can be utilized for preparation of sisal sack sold in local
markets to get reasonable profit

ii. INVESTMENT COSTS: The investment cost includes the cost of building the
cultivation, processing and the packaging unit. The project estimated the total
costs of establishing the unit at ETBIRR 21,961,767. The project also
evaluated the land on which the cultivation and processing unit rent payment
at ETBIRR 97,500 per year for 25 years. The rationale for including the value
of the land and building as part of the investment cost is that if the project was
not undertaken the land would have been put to alternative uses. The sisal
fiber and sack processing plant at capacity of 100% is having 9,774,174
pieces of processed oyster mushroom per year.

III. OPERATING COSTS

The operating costs are comprised of the following categories:
- Sisal farm and processing costs. The company gets sisal fiber raw materials
from its own sisal plant cultivation farm. In farm production cost, leave extraction
cost and other production cost study show the average price was ETBIRR 37 per
pieces of sack. Therefore, the price of ETBIRR 37 per pieces of sack was taken at
begging year and price rate growth 5% annually during the time frame of the
analysis. The quantity of sack was quantified by using import data of Ethiopia and
country supply and demand gap and the machine processing capacity.
-Transport costs: Sisal sack bags need to be processed within any time and hours
after harvesting without spoilage. Transport costs were computed for sisal leave and
processed finished sack bags collected at more than 90 to 100 km from the
processing station. Transport costs also encompass costs of moving the sisal leave to
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a processing located plant about 5 km from the processing station. Besides that,
sisal sack bags distribution costs, for sales to the national market was added to this
category of costs.

- Labor costs: They include overhead staff and temporary labor costs to carry out
the sisal plant farm, extraction and processing activities. The overhead costs are
mainly the salaries paid to the management team of the farm and industry. In
principle the breakdown between fixed and variable costs was analyzed Whittaker
et al. (1985) estimated that fixed and variable costs for a processing unit with a
capacity of 100% production of sisal sack were equal to ¾ and ¼ of total labor costs,
respectively. The ¾ and ¼ shares were then multiplied by total labor costs, in a
particular year, divided by the quantity of sisal sack, which in turn was calculated
using the conversion factor from sisal fiber to sack in principle. But for this project to
use for analysis do no realities in the existing condition of Ethiopia, for practical
temporary labor costs consist of costs of cultivation, extraction and processing the
sack data use from different part of the country, which unfortunately did not
separate fixed and variable costs. There for the breakdown used for fixed and
variable costs was no applied in this project, the labor cost based on data form
cooperatives and private coffee washing station data price per day per man 30 to
35 ET.BIRR was used for the labor cost analysis at the beginning and 5% growth
rate throughout the project life.

IV. OTHER ASSUMPTIONS OF THE ANALYSIS

BANK INTEREST: The Company receives a loan each year from the local
development bank in order to operate during the sisal cropping life season. The bank
finances most of the annual working capital and charges interest only on the
principal. The annual interest rate of 12% is used in the financial analysis.
Regarding the investment costs, the same local development bank was assumed to
provide a loan to cover the initial capital cost. The company has been offered a grace
period of four to five year and the loan is going to be repaid in ten equal annual

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installments at 12% interest per year starting in project fourth year. Interest fees will
be calculated on both the principal and the interest capitalized from begging year.
- The machinery and equipment is depreciated with a straight-line balance
method. The average useful life of the facilities is 15 years.
- Tax rate of depreciation: The processing unit has been classified as “farm
work” with a tax rate of 20%. Depreciation is not a cash flow but has cash flow
consequences because it is tax deductible. Therefore, it provides a tax shield equal
to depreciation multiplied by the tax rate.

- Government tax rate: The value added tax is assumed to be applied to the
owner’s profits. Tax rates are fixed by Ethiopia government Custom Authority, a
national public agency. The Value Added Tax (VAT) of 15 % will be applied to the
owner’s net income.
The salvage value of the equipment was calculated using the straight line
depreciation procedure. The total salvage value is equal to the value of the land and
building rent plus the sum of the depreciation value of the equipment for 9 years
minus the value of 10 years of depreciation taken for the analysis. The opportunity
cost of capital was assumed to be 12%, equivalent to the interest rate of the local
bank.
- Portfolio of assets: The analysis assumes that the farm will invest only in sisal
sack processing and marketing. Other lucrative options are supposed to be not
feasible to invest in.
- Cash flows are estimated by simply counting money flowing in and money flowing
out of the business. Therefore, there was no need to calculate changes in net
working capital (NWC) because of the use of the cash accounting approach.

9.2.3 FINANCIAL APPRAISAL

Rational economic agents prefer to receive cash sooner rather than later. Present
value analysis was used to summarize the quantitative attractiveness of the project.
The net present value (NPV) can be interpreted as the amount by which the market
value of the owner’s wealth will change as a result of undertaking the project
(Bierman, 1984). The formula for computing the net present value of the investment

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includes the present value of after-tax cash flows (PVATCF), present value of
after-tax terminal value (PVATTV) and the after-tax equity proportion of
initial investment (ATEPII). In this study, I have assumed that the two last
components are equal to zero. The PVATCF encompasses cash inflows, cash outflows
and the effects of tax shield and an income tax in the cash flows was computed.
The calculation of the net present value consists first of all in obtaining the Net Cash
Flows After-Taxes (NCFAT), which takes into account the deduction for income tax.
NCFAT are obtained by multiplying the taxable cash flow (Cash inflows-operating
costs - Interest) by the after-tax factor (1-t) adding the tax allowance for
depreciation and subtracting the cash flows for principal payments. The NCFAT of
the ten year includes the salvage value of the processing facilities and the value of
the land at that period. In order to find the NPV, the NCFAT at different points in time
are converted to comparable values at the present time. The opportunity cost of
equity capital (Ke) is the most appropriate discount rate to use in the calculation of
the present value of each cash flow.

Ideally, the investment analysis is based on asset valuation approaches that state
that the value of an investment is determined by discounting expected future cash
flows and using an appropriate risk premium rate for the investment. Asset pricing
models should be used to determine the appropriate risk-adjusted discount
rate to use in estimating cash flows. This study did not have data on the returns
of a similar investment to estimate the risk premium. I have therefore simply used
the interest rate of 10% as an estimation of the opportunity cost of capital for the
investment.

9.3 FINANCIAL STUDY OF THE INVESTEMENT

The financial analysis of the YESIGET MANUFACTURING SISAL DEVELOPMENT
FARM AND JUTE BAG PROCESSING, PLC establishment is based on the data
presented in the previous chapters and the following assumptions:-

Construction period Within 1-2 year

Source of finance 30 % equity 70 % loan

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 Tax holidays 4 years

Bank interest 12%

Discount cash flow 10%

Minimum cash balance (% of sales) 2%
Accounts receivable (%5) 30 days

Raw material local (100%) 4 months

Work in progress 1 days

Finished products 1 days

Cash in hand 5 days

Accounts payable (3%) 30 days

Goods in Process 1day

Administrative and Marketing Expenses 2 months

9.3.1 PROJECT INVESTMENT AND WORKING CAPITAL REQUIREMENTS

The total cost of the project including working capital is estimated at ETB
21,961,767. Broad break-up of the above cost under various heads is given below

Table 9.3.1: Project Investment and Working Capital Cost

Description ET BIRR
Initial Capital Cost
LAND UTILIZATION COST
97,500
INFRASTRUCTURES AND COSTS RELATED TO INSTALLATIONS 161,500

BUILDING- SISAL FARM 3,275,000

BUILDING- SISAL LEAVE PROCESSING 5,764,320

MACHINERY & EQUIPMENT FOR FARM 84,960

MACHINERY & EQUIPMENT FOR FIBER EXTRACTION 3,102,624

MACHINERY AND EQUIPMENT FOR SACK PRODUCTION 2,493,242

FURNITURE AND FIXTURES 119,900

VEHICLES AND FARM MACHINERY 2,200,000

PRE-OPERATING COST 244,757

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 Total Capital Costs 17,446,303
INITIAL WORKING CAPITAL

RAW MATERIALS INVENTORY 1,496,905.80

ADMINISTRATIVE AND MARKETING EXPENSES 712,476.27

OPERATING EXPENSES 2,306,082.05

TOTAL WORKING CAPITAL 4,515,464

CAPITAL INVESTMENT + WC
21,961,767

9.3.2 FINANCIAL BUDGET OF THE INVESTEMENT

9.3.2.1 INITIAL INVESTMENT COST

The total investment cost of the proposed Yesiget Manufacturing Sisal
Development Farm and Jute Bag Processing (PLC) project is estimated at ETB
17,446,303. The fixed investment component is estimated at about ETB 17,299,046
and the pre-production expenditure is 244,757 ETB. Summary of investment costs
are presented on the above table 9.3.1.

9.3.2.2 INITIAL WORKING CAPITAL COST

The total operating cost is estimated at ETB 3 4,515,464 starting of the project.
Operating costs are recorded on a year basis. It is divided into overheads (fixed
costs) and variable costs. The fixed cost component is estimated at about ETB
1,496,905.80 and, ETB 3,018,558.32.1is variable cost and. Summary of operating
costs is presented on the above table 9.3.1.

9.3.3 MEANS OF FINANCE

The promoter of the project has planned to finance the project through a long-term
loan from the Development Bank of Ethiopia; and, partially from own contribution.
The debt equity ratio is assumed to be 70:30. The following table briefly summarizes
the project financing by source of funds bellow the table 9.3.3
Table 9.3.3: Project Investment and Working cost by Source of the Fund

Source of Fund
Description
Equity Contribution Bank Lon Total

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 4,988,448 12,213,097 17,201,546
INVESTMENT COST
244,757 - 244,757
PRE-OPERATING COST
1,399,794 3,115,670 4,515,464
WORKING CPITAL COST
6,633,000 15,328,768 21,961,767
Total Cost
30% 70%
% Share

9.4 FINANCIAL VIABILITY

9.4.1 INCOME STATEMENT

It may be seen from the profitability estimates that the plant would earn a net profit
after taxation of ETB 17.464, 30.695, 31,676 and 31.833 million during the first
years second, third and fourth of operation at 75% 85%, 95% and 100% of the project
utilization capacity. The net profit after tax will increase gradually from to ETB
17.141 million in the fourth year when the unit expects to achieve 100% utilization of
capacity. On the above basis, there is adequate generation of funds out of the plant
operation to service the repayment of term loan and interest liabilities, as also to
meet additional requirement of margin money for working capital in the fourth and
subsequent years. Further, adequate surplus cash is available with the unit for
promoter withdrawal, Annexure-3-1.

9.4.2 CASH FLOW STATEMENT AND BALANCE SHEET

Cash flow on hand at a given period in time (i.e., projection) is critical component of a
business initiative. The cash flow is positive starting Year two. The cash end balance
clearly shows that the accumulated or free cash fund is sufficient to finance the
expansion activities, strengthen the Tomato processing plant establishment for the
sauce, paste and dried tomato production and invest on the establishment of other
services.

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9.4.3 PAY BACK PERIOD
The computation of the payback period is given at Annexure- 4.2. The pay- back
period works out to 3 years and 22 months on the basis of profit after tax. The pay-
back period would be much less in case calculated on the basis of profit before tax.

9.4.4 INTERNAL RATE OF RETURN

Internal rate of return calculations are given at Annexure-4.2, IRR of the project based on 10
years life span, works out to 83%, and 92%, which is quite reasonable before and after tax
respectively.

9.4.5 NET PRESENT VALUE (NPV)

The NPV is calculated by subtracting the present value of all the costs incurred for
the project from the present value of the stream of benefits of Birr 176.489 and Birr
258.020 befor and after tax. As shown in the Annexure-4.2, the resulting NPV value
is greater than zero; which implies that the project is acceptable (profitable). This is
critical stage for paying out dividends to shareholders who have invested in the
business enterprise. Nevertheless, the payment of dividend is delayed until the
enterprise fully pays out its loan (both interest and principals)

9.4.6 BREAK EVEN ANALYSIS

The break-even point of the project is estimated by using income statement at full
capacity of production of the projection.
BEP (%) = Fixed Cost (1,496,905.80) = 4.17%
Sales – Variable cost (361,644,000 - 3,018,558.32) = 358625441.68

The break even ratio, the ratio of breakeven sales to planned production, for the
entire period is between 0.0417 and 0.10 the break even ratio of the project is not
only low but it also steadily declines throughout the operation period. This low break
even ratio means low risk to the investment; the business has great level of security
against unforeseen operational difficulties.

9.5. LOAN REPAYMENT SCHEDULE

The loan repayment period is simply defined as the period (i.e. the number of years)
required paying the principal and interest of the original investment cost throughout

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the project life. The business result obtained reveals that the investment is
financially viable and has a healthy cash flow forecast. The outcome of the financial
analysis reveals that: based on the following repayment schedule the annual
payment was described on the base of bellow the given table 8.5 bellows throughout
the project life.

Table 9.5: loan repayment Schedule

Total Investment 21,962

Long Term Interest Rate 12.00%
Percent Financed 70.00%
Loan Amount $15,373
Loan Term 10
5 6 7 8 9 10 11 12 13 14
Beginning Balance $15,373 $14,497 $13,516 $12,417 $11,186 $9,808 $8,264 $6,535 $4,598 $2,429
Interest Rate 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%
Interest $1,845 $1,740 $1,622 $1,490 $1,342 $1,177 $992 $784 $552 $292

Annual Payment $2,721 $2,721 $2,721 $2,721 $2,721 $2,721 $2,721 $2,721 $2,721 $2,721
Principal $876 $981 $1,099 $1,231 $1,378 $1,544 $1,729 $1,937 $2,169 $2,429

Ending Balance $14,497 $13,516 $12,417 $11,186 $9,808 $8,264 $6,535 $4,598 $2,429 $0

9.6 SENSITIVITY ANALYSIS

9.6.1 RISK AND UNCERTAINTY

The following risks and uncertain incidents that might affect the project could occur
during operating period of the project. If the global economic crisis and inflation is
prolonged and intensified, it will affect the project cost benefits analysis. Besides, it
may also affect the production cost and both inland and offshore markets.

9.7. SOCIO-ECONOMIC BENEFITS

The project can create permanently employment for 34 persons and for more than 75
to 40 casual laborers in daily base for more than ten months. The establishment of
such farm and processing plant will have a foreign exchange earing effect to the
country by supplying high quality of sisal sack packaging processed for national
market. The project will also create backward linkage with the coffee producer

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farmers and cooperatives an also generates income for the government in terms of
tax revenue and payroll tax

The envisaged project of Farm and Plant possesses wide range of benefits where it
promotes the socio-economic goals and objectives stated in the strategic plan of the
Southern Nation, National Regional State. It is boost sinter sectorial linkage between
the agricultural (export crop producers) and industrial sector. At the sometime,
therefore, it helps diversify the economic activity of the region. The other major
benefits are listed as follows:

A. Profit Generation
The project is found to be financially viable and earns a profit of Birr 17.46 million
and 31.833 million for industry respectively at the begging of the project and
increased within the project life. Such result induces the project promoters to reinvest
the profit which, therefore, increases the investment magnitude in the region.
B. Tax Revenue
In the project life under consideration, the region will collect about Birr 9.404 million
and 17.141 million from farm as well as from processing plant at the beginning of
the project then increased in the project life. The tax comes from corporate tax
payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
additional fund for the regional government that will be used in expanding social and
other basic services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens
of the region. That is, it will provide permanent employment to 75 and 40 totally 115
professionals as well as support staff for farm and plant respectively and for casual
labor from 40-45 labor for farm and plant respectively. Consequently the project
creates income employees for farm and industry Birr 1.4 million for technical and
administrative Staffa per year. This would become of the commendable
accomplishments of the project.

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10. CONCLUSIONS AND RECOMMENDATIONS

10.1 CONCLUSIONS
Based on the framework set out in this feasibility study the following conclusions
were made regarding the feasibility of proposed environmental friendly farm
productions enterer prize.

• A market opportunity was identified for the domestic sales market. The demand
local market trend confirms the products are marketable

• The analysis of technical feasibility of the proposed farm and Industry Company
revealed that the machinery, equipment’s, production facilities and services and the
human resource could be integrated for efficient Sisal plantation and fiber production
farm and sack productions.

• The analysis on financial feasibility of the proposed company revealed that based
on the assumptions made, the company is profitable. The company is projected to
have a healthy cash flow and is viable over long term. The positive financial
feasibility is, however, dependent on stable inflation and macro-economic conditions.
The profitability of the farm and industry can be further increased by using
alternative energy costs.

Based on the framework set out in this feasibility study where feasibility is assessed
in fourth core areas,

10.1.1 MARKET FEASIBILITY

A market opportunity was identified for the domestic sales at the present. The
demand and market trend confirms the products are marketable.

10.2.2. TECHNICAL FEASIBILITY

The analysis of technical feasibility of the proposed farm and Plant Company
revealed that the initial stock, machinery, equipment, production facilities and
services and the human resource could be integrated for efficient sisal farm and sack

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production processing. The marketing margin and transportation farcicalities will
enables the project its products.

10.2.3 FINANCIAL FEASIBILITY

The analysis on financial feasibility of the proposed company revealed that based on
the assumptions made, the company is profitable. The company is projected to have a
healthy cash flow and is viable over long term. The positive financial feasibility is
however, dependent on stable inflation and macro-economic conditions. The profitability
of the farm and plant can be further increased by using alternative production crops
type and costs.

10.2.4 OVERALL FEASIBILITY

Based on the framework set out in this feasibility study where feasibility is in
assessed of the above four core areas, it can be concluded that the proposed sisal
farm and processing company is feasible. The results of the feasibility study,
however, are heavily dependent upon the assumptions made during the study and
other operating environments (political, environmental and economic conditions)
remain relatively stable.

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 11. ANNEXTURE
1. PROJECT INVESETMENT

1.1 LAND AND SITE ISTALLATION

Infrastructures and costs related to installations

Rate Cost
Equipment Unit Qt.
Birr Birr
SITE WORKS
Site Clearing and Leveleing M2 100.00 20.00 2,000.00
Fence works Ml 40 600 24,000.00
Main and Pedestsial Gaet Ls 1 25,000 25,000.00
51,000.00
UTILITES
Electricity installation (30 KW) Set 1 75,000 75,000
Site Electrification Ls 1 5,000 5,000
WaterTanaker 1 15,500 15,500
Water Supply Lines and Sytwms Ls 1 5,000 5,000
Waste Water Disposal System Ls 1 10,000 10,000
110,500
Total 161,500
1.2 VEHICLES AND FARM MACHINERY

VEHICLES AND Farm Machinery

equipment Capacity Unit Qt. Rate
Birr
Tractors 110 HP No 1 1,200,000
Trailer Disk harrow ,( 28 Disc), Disc plough ( 5
No set 200,000
Disc),Ripper - Ridger
Double Cap (4WD) 5 person No 1 800,000
2,200,000

1.3 PRELIMINARY AND PREOPERATIVE EXPENSES

PRE – OPERATING EXPENSE

TYPE OF EXPENSES ASSUMPTIONS COST
Feasisbity Studies and Engineering 10000
Installation Cost 3% Machinery and Equipments 74,797
Premium Insurance cost 0.50% Fixed Asset 41,653
Traianing 10,000
Safety Wear& Uniforms One year Performa 25,000
Legal documentation, security 1% 83,307
deposits, stamp duty and other legal
Total in Birr 244,757

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ANNEXTURE-2 INCOM STATEMENT ASSUMPTION AND DETAILS

2.1 OPERATING EXPENSE ASSUMPTIONS

Operating Expenses for the project and there basis are taken as follows
Description Basis Basis
CONSTRUCTION AND FINANCE
Construction period 1 years 1-2 year
Bank interest 10% 9.5%
Discounted cash flow 10% 10%
Source of finance 30% equity and 70 % loan
ECONOMIC ASSUMPTIONS
Utilities price growth 10%
Material price growth rate 5%
Wage Growth Rate 5%
Tax rate 35%
EXPENSE
Salaries Expenses As per Salary Estimations
Staff Benefits 20% of Payroll
Insurance 1% of Eqp. Cost
Administrations expense 5% of Sales
Farm Production 50% of Sales
Selling Expenses 5 % of Sales

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 2.2 DEPRECIATION CALCULATION (Birr’000)

Rate ( % ) 0 1 2 3 y4 -10
1-2 3-10
LAND UTILIZATION COST 5% 5% 98 5 5 5 5
INFRASTRUCTURES AND COSTS RELATED TO 5% 5% 162
INSTALLATIONS 8 8 8 8
BUILDING- SISAL FARM 10% 12% 3,275 328 328 328 328
BUILDING- SISAL LEAVE PROCESSING 10% 10% 5,764 576 576 576 576
MACHINERY & EQUIPMENT FOR FARM 20% 20% 85 17 17 17 17
MACHINERY & EQUIPMENT FOR FIBER 20% 20% 3,103
EXTRACTION 621 621 621 621
MACHINERY AND EQUIPMENT FOR SACK 20% 20% 2,493
PRODUCTION 499 499 499 499
FURNITURE AND FIXTURES 20% 20% 120 24 24 24 24
VEHICLES AND FARM MACHINERY 20% 20% 2,200 440 440 440 440
PRE-OPERATING COST 10% 10% 245 24 24 24 24
Total 17,544 2,542 2,542 2,542 2,542

77
Annexure-3 FINANCIAL PROJECTIONS

3.1 PROJECTED INCOME STATEMENT (000 Birr)

INCOME STATEMENTS( Et birr '000)
Year 0 Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Gross revenue 276,730 328,022 344,423 361,644 379,727 398,713 439,581 484,638 534,314 589,081
Sisal Sack production
Raw Materils 22,454 24,699 27,169 29,886 32,874 36,162 39,778 43,756 48,131 52,944
Farm Manegment Cost 155,461 161,531 161,618 161,709 161,804 161,904 162,009 162,119 162,235 162,357
Sissal Extraction Cost 38,568 47,280 54,577 63,003 72,734 83,972 96,950 111,937 129,245 149,234
Sack Production Processing Cost 22,577 29,403 33,945 39,190 45,248 52,243 60,322 69,652 80,428 92,872
Casual Labor at preparation line 240 265 291 306 321 337 354 371 390 410
Salary and Wage Production Staffs) 874 918 964 1,012 1,063 1,116 1,172 1,230 1,292 1,356
Utilities 95 95 95 95 95 95 95 95 95 95
Trasport Cost 932 932 932 932 932 932 932 932 932 932
Sub-total of processsing plant cost 241,201 265,122 279,590 296,132 315,070 336,760 361,610 390,092 422,748 460,200
Gross margin 35,529 62,900 64,834 65,513 64,657 61,953 77,971 94,546 111,566 128,881
General administration & selling expenses
Salary and wage fur manegeral 534 561 589 618 649 682 716 751 789 828
Utilites 10 11 12 13 15 16 18 19 21 24
Repairs & renewals 170 179 188 197 207 217 217 217 217 217
Travel and perdime 53 59 65 71 78 86 95 104 114 126
Stationary and printing 8 8 9 9 10 10 11 11 12 12
Marketing Expensses 2,767 9,841 10,333 10,849 11,392 11,961 13,187 14,539 16,029 17,672
Insurance expense 87 92 96 101 106 111 117 123 129 135
Professional fees (legal, audit, etc.) 12 13 13 14 15 15 16 17 18 19
Depreciation expense 2,542 2,542 2,542 2,542 2,542 2,542 2,542 2,542 2,542 2,542
Amortization expense (pre production cost) 621 621 621 621 621 621 621 621 621 621
Miscellaneous expense 12 13 13 14 15 15 16 17 18 19
Total of Adm and Selling Exp 6,816 13,937 14,479 15,049 15,648 16,277 17,555 18,961 20,510 22,215
Earnings before interest and taxes 28,713 48,963 50,354 50,463 49,009 45,676 60,416 75,585 91,056 106,666
Less interest expense 1,845 1,740 1,622 1,490 1,342 1,177 992 784 552 292
Pre-tax income 26,868 47,224 48,732 48,973 47,666 44,499 59,424 74,800 90,504 106,374
Cumulative pre-tax income (NOL) 26,868 74,091 122,824 171,797 219,464 263,963 323,388 398,188 488,692 595,067
Taxes 9,404 16,528 17,056 17,141 16,683 15,575 20,799 26,180 31,677 37,231
Earnings before taxes 26,868 47,224 48,732 48,973 47,666 44,499 59,424 74,800 90,504 106,374
Less taxes 9,404 16,528 17,056 17,141 16,683 15,575 20,799 26,180 31,677 37,231
Net income 17,464 30,695 31,676 31,833 30,983 28,925 38,626 48,620 58,828 69,143
Groos Profit Margine 13% 19% 19% 18% 17% 16% 18% 20% 21% 22%
Net profit Margine 6.31% 9.36% 9.20% 8.80% 8.16% 7.25% 8.79% 10.03% 11.01% 11.74%
Operting Profit Margine 10% 14% 14% 14% 13% 11% 14% 15% 17% 18%

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 3.2 PROJECTED BALNCE SHEET (000 Birr)

Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Assets
Cash 4,515 -2,251 26,244 57,819 89,274 119,569 147,458 183,610 229,158 284,242 348,886
Inventory - 19,296 21,210 22,367 23,691 25,206 26,941 28,929 31,207 33,820 36,816
Accounts receivable - 13,836 16,401 17,221 18,082 18,986 19,936 21,979 24,232 26,716 29,454
Total current assets 4,515 30,881 63,854 97,407 131,047 163,761 194,334 234,518 284,597 344,777 415,157
Gross property, plant & equipment 17,446 17,446 17,446 17,446 17,446 17,446 17,446 17,446 17,446 17,446 17,446
Less: Accumulated depreciation expense - -2,542 -5,083 -7,625 -10,166 -12,708 -15,249 -17,791 -20,332 -22,874 -25,415
Net property/equipment 17,446 14,905 12,363 9,822 7,280 4,739 2,197 -344 -2,886 -5,427 -7,969
Total assets 21,962 45,786 76,218 107,229 138,327 168,500 196,531 234,174 281,712 339,350 407,188

Liabilities Initial balance Year 1 Year 2 Year 3 Year 4 Year 5 Year 5 Year 5 Year 5 Year 5 Year 5
Accounts payable - 7,236 7,954 8,388 8,884 9,452 10,103 10,848 11,703 12,682 13,806
Notes payable/short-term debt - 0 0 0 0 0 0 0 0 0 0
Total current liabilities - 7,236 7,954 8,388 8,884 9,452 10,103 10,848 11,703 12,682 13,806
Long-term debt from Bank 15,373 14,497 13,516 12,417 11,186 9,808 8,264 6,535 4,598 2,429 0
Shareholders equity 6,589 24,053 54,748 86,424 118,257 149,240 178,165 216,790 265,411 324,238 393,382
Total long-term debt and shareholders equity 21,962 38,550 68,264 98,841 129,443 159,048 186,429 223,325 270,009 326,668 393,382
Total liabilities 21,962 45,786 76,218 107,229 138,327 168,500 196,531 234,174 281,712 339,350 407,188

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 3.3 PROJECTED CASH FLOW STATEMENT (000 Birr)

Year 1-2 year Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10

Net income 17,464 30,695 31,676 31,833 30,983 28,925 38,626 48,620 58,828 69,143

Plus depreciation 2,542 2,542 2,542 2,542 2,542 2,542 2,542 2,542 2,542 2,542

Less increase in inventory - (19,296) (1,914) (1,157) (1,323) (1,515) (1,735) (1,988) (2,279) (2,612) (2,996)

Less increase in accounts receivable - (13,836) (2,565) (820) (861) (904) (949) (2,043) (2,253) (2,484) (2,738)

Plus increase in accounts payable - 7,236 718 434 496 568 651 746 854 980 1,124

Cash flow from operations - (5,891) 29,476 32,674 32,686 31,674 29,432 37,881 47,485 57,253 67,074

Less investment (17,446) - - - - - - - - - -

Cash flow from operations and invests (17,446) (5,891) 29,476 32,674 32,686 31,674 29,432 37,881 47,485 57,253 67,074

Plus net new equity capital raised 6,589 - - - - - - - - - -

Less dividends paid - - - - - - - - - - -

Plus net new long-term debt 15,373 (876) (981) (1,099) (1,231) (1,378) (1,544) (1,729) (1,937) (2,169) (2,429)

Plus net new bank borrowings - - - - - - - - - - -

Cash flow from ops, invests, and fin 4,515 (6,767) 28,495 31,575 31,455 30,295 27,888 36,152 45,548 55,084 64,645

Beginning cash balance - 4,515 (2,251) 26,244 57,819 89,274 119,569 147,458 183,610 229,158 284,242

Ending cash balance 4,515 (2,251) 26,244 57,819 89,274 119,569 147,458 183,610 229,158 284,242 348,886

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 ANNEXURE-4 FINANCIAL EVALUTION

4.1 Pay BACK PERIOD (000 Birr)

600,000

500,000

400,000

300,000

200,000

100,000

-
1 2 3 4 5 6 7 8 9 10 11

(100,000)

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4.2 INTERNAL RATE OF RETUREN (000 Birr)

PROJRCT WORTH MAESURE ( NPV, IRR, PB ) before tax . Birr '000

Year 0 Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7 Y-8 Y-9 Y-10
Cash flow (17,446) (5,891) 29,476 32,674 32,686 31,674 29,432 37,881 47,485 57,253 67,074
PV factor 100% 90.09% 82.64% 75.13% 68.30% 62.09% 56.45% 51.32% 46.65% 42.41% 38.55%
PV of cash flow (17,446) (5,307) 24,359 24,548 22,325 19,666 16,615 19,441 22,152 24,281 25,857
NPV 176,489
IRR ( After Tax ) 83%
Cash flow (17,446) (5,891) 29,476 32,674 32,686 31,674 29,432 37,881 47,485 57,253 67,074
Cumultaive cash (17,446) (23,337) 6,139 38,813 71,499 103,173 132,605 170,487 217,971 275,224 342,298
Pay Back Period 3.00 Years 27 Months

PROJRCT WORTH MAESURE ( NPV, IRR, PB ) AFTER TAX . Birr '000

Year 0 1 2 3 4 5 6 7 8 9 10
Cash flow (17,446) (5,891) 29,476 32,674 49,827 48,357 45,007 58,680 73,665 88,929 104,305
PV factor 100% 90.09% 82.64% 75.13% 68.30% 62.09% 56.45% 51.32% 46.65% 42.41% 38.55%
PV of cash flow (17,446) (5,307) 24,359 24,548 34,032 30,025 25,407 30,115 34,365 37,715 40,210
NPV 258,020
IRR ( After Tax ) 92%
Cash flow (17,446) (5,891) 29,476 32,674 49,827 48,357 45,007 58,680 73,665 88,929 104,305
Cumultaive cash (17,446) (23,337) 6,139 38,813 88,640 136,997 182,004 240,684 314,349 403,278 507,583
Pay Back Period 3.00 Years 22 Months

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4.3 Annual Statement of Costs and benefits (Birr)

Annual Statement of Costs and benefits (Birr)

Description Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 year 6 Year 7 Year 8 Year 9 Year 10
Investment cost 21,962 -
Operating costs - 248,017 279,059 294,069 311,181 330,718 353,037 379,165 409,054 443,257 482,415
Total cost 21,962 248,017 279,059 294,069 311,181 330,718 353,037 379,165 409,054 443,257 482,415
Sales/Revanue - 276,730 328,022 344,423 361,644 379,727 398,713 439,581 484,638 534,314 589,081
Net Revanue befor Tax (21,962) 28,713 48,963 50,354 50,463 49,009 45,676 60,416 75,585 91,056 106,666
Discount factor(10.5%) 1.000 1.105 1.22 1.35 1.49 1.65 1.82 2.01 2.22 2.22 2.22
PVC 21,962 274,059 340,731 396,699 463,971 545,023 642,527 762,880 909,326 4357177.2 8692392.6
PVB (21,962) 31,728 59,784 67,928 75,241 80,767 83,131 121,557 168,024 666197.95 1354357.7

PVC= ∑PVc PVB = ∑PVb

21,962 2,686,754
NPV= ∑PVb- ∑PVc 2,664,792

B/C ratio=PVB/PVC 122.34

4.4 Cash Flow Table for Net Present Value Calculation (on Equity)
Cash Flow Table for Net Present Value Calculation (on Equity)

describtion Construction Phase

Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Scrap Value

Total Cash inflow 0 276,730 328,022 344,423 361,644 379,727 398,713 439,581 484,638 534,314 589,081

Cash Surplus/Deficit 0 241,201 265,122 279,590 296,132 315,070 336,760 361,610 390,092 422,748 460,200
Dividends
Equity capital refund

Total Cash outflow 6,633 0 0 0 0 0 0 0 0 0

Equity Capital Paid 6,633 0

Net cash Return (6,633) 241,201 265,122 279,590 296,132 315,070 336,760 361,610 390,092 422,748 460,200 3,361,891

Cumulative Cash Return (6,633) 234,567.75 499689.453 779278.965 1075410.71 1390480.73 1727240.59 2088850.92 2478943.17 2901690.7 3361890.6 16,531,411

NPV & IRR on Equity Capital Invested

Discount Rates 11%
Net Present Value 280158
Internal Rate of Return 3646%
Payback Years Three Years

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